The deal, which is part of a $US2.6 billion development in the Persian Gulf, was signed with Iran's oil company Petropars, which is partly owned by the Iranian Ministry of Industry.

Under terms of the contract, Statoil, will be responsible for building the offshore part, which includes three pipelines linked to a land-based plant of three phases of the South Pars project.

Petropars will operate the onshore plant that should start producing in late 2004.

Statoil said the agreement was part of its strategy to expand its international upstream activities and it comes despite threats from the US government to impose sanctions against companies that invest in Iran's energy sector.