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China and Iran have signed a contract to jointly establish an oil terminal on Qeshm Island in the southern Persian Gulf, which will turn the island into an important hub for oil production and reserves, Iran's official media reported on June 12.

Iran's Machine Making Co. signed the contract, valued at $550 million, with China's largest heavy industry enterprise to build the island into Iran's largest oil production and reserve base.

After the completion of the first phase of the project, Qeshm Island will be capable of storing 10 million barrels of crude oil, according to Iranian state television. 

This is one of the largest projects currently in the field, according to an employee working on the project. It can accommodate tankers up to 140 meters deep and at least 30 million barrels of crude oil. 

The oil terminal involves a 10-year lease agreement and will generate up to $300 million in revenue every year.

Located north of the Strait of Hormuz, Qeshm Island is the largest island in both Iran and the Persian Gulf, covering an area of 1,491 kilometers. All oil tankers in the Persian Gulf will have to pass through it.