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Cuba OKs Spain-Norway-India oil venture in Gulf

Written by: Staff

HAVANA, May 10 (Reuters) Cuba has struck a deal with Spanish, Norwegian and Indian oil companies to drill in the 1.6-km waters of the Gulf of Mexico, industry sources and diplomats said.

The possibility of striking oil in Cuban waters just 120 km off US shores at a time of soaring fuel prices and rising global demand has set off a political debate over whether U.S. companies, sidelined by American sanctions, should be allowed to explore there.

Contracts will be signed May 23 in Havana between Spanish major Repsol YPF, Norway's Norsk Hydro and ONGC Videsh Ltd, the overseas arm of India's state-owned Oil and Natural Gas Corp., they said yesterday.

Drilling will most likely not begin until 2008 due to a tight market for deep-sea exploration rigs as the world's search for oil intensifies under pressure from the high prices, one industry official said.

Repsol found good-quality light oil in Cuba's economic exclusion zone of the Gulf of Mexico in 2004, but not in commercially viable quantities.

The Spanish company will complete seismic studies by the end of this month to determine where next to drill with its two new partners, said the official, who asked not to be named.

''There might be quite good opportunities for finding something, and things would really change then. It's very exciting,'' a European diplomat said.

The U.S. Geological Survey estimated last year that the North Cuba basin could contain some 4.6 billion barrels of oil, with a high-end potential of 9.3 billion barrels.

EMBARGO EXCEPTION SOUGHT Complaining that energy-hungry China could gain access to oil ''within spitting distance'' of the United States, Sen. Larry Craig, an Idaho Republican, has introduced legislation that would seek an exception to the trade embargo for U.S. oil companies so they could drill in Cuba.

U.S. companies are barred from exploring for oil in communist Cuba under trade sanctions enforced against President Fidel Castro's revolutionary government since 1962.

Legislators from Florida, where anti-Castro Cuban exiles have political clout, seek to block Cuba drilling near the Florida coastline and penalize executives of foreign companies that help Cuba look for oil and gas.

Havana is eager to see American oil companies join forces with the anti-embargo lobby led by U.S. farmers who have been selling food to Cuba for four years.

Cuba invited U.S. exploration at a meeting with oil industry executives in Mexico City in February.

''The purpose of the conference was to tell them we are open for business as soon as the laws of their country permit,'' said Juan Fleites, general manager of the Cuban state oil company CUPET.

Cuba produces 60,000 barrels per day of poor-quality oil and imports about 90,000 bpd of oil and derivatives from its ally Venezuela.

China's giant oil and gas company Sinopec Corp. signed an agreement last year to produce heavy oil with CUPET in Cuba's westernmost Pinar del Rio province from on-shore wells.

China is renting towers for directional drilling in oil fields run by Canadian companies Sherritt International and Pebercan Inc. along a coastal oil belt producing heavy oil and gas used to generate electricity.

But China has no involvement in deep-sea exploration in the 112,000-square-km off-shore area Cuba opened up to foreign exploration in 1999, divided into 59 blocks.

Sherritt has signed exploration contracts for four blocks, but is waiting to see what Repsol discovers in its six blocks.

Industry experts said Cuba will have to find large deposits of light oil to make it worthwhile extracting oil so deep under water.

Reuters PDS VP0425

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