The Norwegian oil company Statoil has agreed to develop an offshore petroleum field in Iran, despite warnings from the US against investing in the country.

This is the first contract in the Middle East for state-owned Statoil, and the group said it was in line with its strategy of international expansion.

This new activity is in line with Norwegian foreign policy, which encourages increased trade relations with Iran

Statoil

Statoil will invest $300m (�192m) in the project over four years, in return for a 40% stake in the offshore operation.

The deal was signed with Iran's oil company Petropars, which is partly owned by the Iranian Ministry of Industry.

It is part of a wider $2.6bn development in the Persian Gulf.

First move

Statoil, which is one of the largest gas suppliers to the UK, will be responsible for building the offshore part of three phases of the South Pars project.

Statoil said the agreement was part of its "strategy to expand its international upstream activities".

It comes despite the US government's threat to impose sanctions against companies that invest in Iran's energy sector.

"This new activity is in line with Norwegian foreign policy, which encourages increased trade relations with Iran", said Statoil.

Long term commitment

Statoil said production would start late in 2004.

The agreement means the Norwegian company will own 40% of the offshore development, which includes three pipelines linked to a land-based plant.

Petropars will operate the onshore plant.

The US president George Bush has branded Iran, Iraq and North Korea the "axis of evil" and extended sanctions by five years against companies who have business interests in the countries.

A spokesman for the Norwegian ministry Karsten Klepsvik said Norway disliked "extraterritorial laws".

"When it comes to Norway and Iran, we have completely normal diplomatic relations," said Mr Klepsvik.