"Iran is studying the possibility of setting up a refinery in Spain, specifically in Algeciras," on the south coast, Garcia-Margallo said in Brussels after welcoming the implementation of the Iran nuclear agreement.
Spain was "on the verge of reaching agreement with Rosneft," the Russian oil giant, to build the refinery, when negotiations were interrupted by EU sanctions imposed on Russia over the Ukraine crisis, the minister said.
"But Iranian investment can fill the void" to create jobs, he said.
Iran, which currently exports one million barrels of oil per day, announced its plans to increase exports by 500,000 barrels per day following the lifting of international sanctions and by another 500,000 barrels in six months.
Iranian Foreign Minister Mohammad Javad Zarif (R) shakes hands with Garcia-Margallo during a September meeting inTehran. Photo: AFP
But Tehran needs to find new markets, especially in Europe, for its oil at a time when the market faces a surplus.
China, India, South Korea and Japan have become the main customers of Iranian oil after European countries in 2012 halted purchases as they enforced the EU sanctions imposed over Iran's controversial nuclear programme.
The European Union on Saturday lifted its economic sanctions against Iran after the UN atomic watchdog announced that Tehran had complied with the terms of last July's landmark deal aimed at scaling down its nuclear programme.
On January 9th, Iran's deputy oil minister Abbas Kazemi had raised the idea of building the oil refinery in Spain that would have a capacity of 200,000 barrels involving exclusively Iranian oil.
Garcia-Margallo said Spain was in a good position in Iran where "opportunities are very big," and where "we must practically rebuild the whole energy apparatus."
"We have taken the lead compared to other countries," he added.