The 20-year agreement calls for the state-owned China National Petroleum Corp. to begin producing 25,000 barrels of oil a day, then gradually increase to 125,000 a day, said Asim Jihad, a spokesman for the Iraqi Oil Ministry.

The contract revamps a deal the Chinese company reached with Saddam Hussein in 1997 to develop the Ahdab oil field in Wasit province, south of Baghdad, near the Iranian border. But unlike that deal, which called for China to share in the revenues, the current contract is based on a fixed-fee structure.

Western oil companies this summer came close to reaching an agreement with the Oil Ministry to return to Iraq. Those deals were for smaller technical service contracts that involved giving advice on how to boost production. The China deal is a so-called service contract, which is more lucrative and involves large-scale development of the field.

Jihad said the technical service contracts, which were to be completed June 30, have been postponed as negotiations continue with the Western concerns, including Shell, BP and Exxon Mobil. Most of the major oil contracts are to be awarded in the next year and a half through a process involving 35 companies identified by the Oil Ministry, he said.

The deal with China rebuts concerns that the U.S. government was manipulating the process to benefit American corporations, Jihad said. "We hope this will refute all the rumors that say the American companies are the only ones benefiting from the American occupation," he said.

The contract also requires China to build a major electrical station in the area to help boost Iraq's overworked power grid.

Also yesterday, Ahmed Chalabi, the former Iraqi exile who sought to convince U.S. officials that Hussein's government had weapons of mass destruction, said a close associate of his had been detained by the U.S.-led coalition.

Chalabi, now head of Iraq's de-Baathification commission, which is responsible for purging members of Saddam's Baath party from the government, said the agency's executive director, Ali Faisal al-Lami, was detained at the Baghdad International Airport after returning with his family from Lebanon.

"This action shows that every Iraqi faces arrest and detention without any reason," Chalabi said in a statement. "We demand that Mr. Ali be freed immediately."

Sgt. Susan James, a U.S. military spokeswoman, confirmed that a man was detained at the airport Wednesday for "working within the highest echelons of the special groups," a term the military uses to refer to Iranian-backed militia cells.

The detainee, whom the military declined to name, was involved in multiple bombings, including a June attack in Sadr City that killed four Americans and six Iraqis, James said.

In another development, anti-American cleric Muqtada al-Sadr indefinitely extended a cease-fire order for his Mahdi Army militia. The suspension of the group's fighting, first announced almost exactly one year ago, has been credited as a major reason for the sharp decline in violence in Iraq

"The freeze of the Mahdi Army will continue for an open-ended time," Sadr said. "And anyone who breaks this freeze should not consider himself part of the ideological movement."