OREANDA-NEWS. July 18, 2011. State-owned China National Petroleum Corp (CNPC) is discussing the possible leasing of one or more offshore exploration blocks in Cuba's Gulf of Mexico acreage, a Cuban state oil company official said.

"They are discussing that. They have to look at the data and see if that's what they want, and that's up to the company," Guillermo Hernandez Perez, exploration director of Cuba's state oil company CUPET, told.

U.S. officials have voiced concern about communist-ruled Cuba's oil drilling plans south of the Florida coast, which have touched off opposition from local lawmakers who say this threatens the state's environment.

Chinese Vice President Xi Jinping and CNPC President Jiang Jiemen signed energy accords in Havana last month during a visit to the island but the text of the agreements were not disclosed.

Hernandez's comments, made after he gave a presentation to the Trinidad and Tobago Energy Chamber, indicated CNPC's interests included Cuba's Gulf of Mexico area, where Spanish oil giant Repsol YPF (REP.MC: Quote) is due to start exploration later this year using a Chinese-built rig.

"Repsol is going to be drilling at least one well in the last quarter of 2011 and we will see what happens after," Hernandez said.

The high-tech Scarabeo 9 rig is expected to arrive in Cuban waters in late September or early October and start drilling the first of a series of wells planned by companies including Repsol, Malaysia's Petronas [PETR.UL] and a unit of India's ONGC (ONGC.NS: Quote).

China, Cuba's second largest trading partner after Venezuela, is also looking to negotiate contracts for a major expansion of a Cuban oil refinery in the city of Cienfuegos, and the construction of a liquefied natural gas project, including a regasification plant, at the refinery.

Sources have said the projects would cost USD 6 billion, most of which would be provided by China and backed by oil from Venezuela.

ENVIRONMENTAL, POLITICAL SENSITIVITY
Repsol's planned well in the Cuban Gulf of Mexico acreage will be about 60 miles (100 km) from Florida. This proximity has triggered alarm bells in Washington and Miami in light of the BP Plc (BP.L: Quote)(BP.N: Quote) oil spill off Louisiana last year.

Some U.S. lawmakers have filed bills in Washington attempting to thwart the drilling by punishing foreign companies and individuals who take part in Cuba's exploration.

U.S. oil companies cannot work in Cuba due to the long-standing U.S. trade embargo against the island.

"Why are the Americans not coming to Cuba? Because the government of the U.S. doesn't allow them to come. They cannot even talk to us," CUPET's Hernandez told.

Nevertheless, Lee Hunt, president of the Houston-based International Association of Drilling Contractors, visited Cuba last year using a special travel license under the embargo.
After meetings in Havana, Hunt said Cuba's oil industry wanted to work with its counterparts in the United States and Mexico to avoid the kind of well blowout and catastrophic spill that occurred at the BP well.

Repsol representatives have met U.S. Interior Secretary Ken Salazar to assure him they have solid safety plans in place should there be a blowout in the Cuban offshore waters.

Chinese involvement in Cuban offshore oil areas would add a new element to the U.S. debate over troubled relations with Cuba and might be used by some U.S. lawmakers who want to justify a hard line against Cuba's exploration plans.

In 2005, the Chinese National Offshore Corp tried to buy California-based oil company Unocal, but there was strong opposition in the U.S. Congress on grounds of national security.