Iran and China will sign a $3 billion contract next month to upgrade Iran's oil refining capacity, according to Iran's Mehr News agency.

Iran's deputy oil minister Abbas Kazemi said in Tehran on Tuesday that the deal will focus on upgrading the Abadan oil refinery, Mehr said.

"Last week, China officially opened the financing for the plan to fix and improve the quality of the Abadan refinery," Mehr quoted Kazemi as saying.

Iran's refineries are in a state of disrepair after years of sanctions which prevented access to parts and new technology.

The deal is expected to be signed when a delegation of Chinese oil officials visit Tehran next month, Kazemi said, according to Mehr News.

(Reporting By Babak Dehghanpisheh)