Iran's Petroleum Engineering and Development Company says China will invest $2.5 billion in developing projects of the South Azadegan oilfield in the southwestern province of Khuzestan.

Managing director of the company told Mehr news agency on Friday that the first phase of the development project has already started.

Naji Sa'douni put the current output of the field at about 55,000 barrels per day (bpd), saying that it is expected to reach 320,000 bpd upon the completion of the first phase.

The official went on to say that the second phase of the project will boost output to 600,000 bpd.

He did not elaborate which Chinese company would undertake the development.

In 2009, the China National Petroleum Corporation and the National Iranian Oil Company signed a $1.76 billion deal to develop the neighboring North Azadegan field, where they hope to extract 75,000 bpd.

The Azadegan deposit is one of the world's largest, with reserves of 42 billion barrels.

Iran and China are also close to signing a $7-billion deal to cooperate in the development projects of two oil refineries in the southwestern Iranian city of Abadan and the central city of Isfahan.

The refineries are scheduled to produce 30 million liters of gasoline and diesel per day.

Iran has OPEC's second-highest oil output, and ranks second in the world in terms of natural gas reserves after Russia.