According to China's People’s Daily Online, the oil terminal will be built on Qeshm Island in the southern part of the Persian Gulf and will turn the island into a major center for oil production and storage.
The $550-million contract was signed by Iran's Machine Making Co. and China's largest heavy industry enterprise.
With the completion of the first stage of the joint project, Qeshm Island will be able to store 10 million barrels of light, heavy and ultra-heavy crude oil produced in Iran's West Karoun region.
The oil terminal will be large enough to handle tankers up to 140 meters deep and store an estimated 30 million barrels of crude.
In keeping with a 10-year lease contract the terminal will generate up to $300 million in revenues annually.
Qeshm Island, with an area of 1,491 square kilometers, is the largest island in the Persian Gulf and lies to the north of the Strait of Hormuz.
Iran also plans to set up a financial center on Qeshm Island as a gateway for foreign banks and other institutions to enter its domestic market, Bloomberg reported on Tuesday.
Several Chinese and Russian banks have already expressed interest in opening offices on the island.