LONDON (BBC) -- The discovery of potential deep-water oil and gas reserves off Cuba's northern coast has caught the eye of the world's energy-hungry nations.

The U.S. could see rigs drilling for Cuban oil only 50 miles off Florida India's state-run oil firm ONGC, already signed up to exploration in the area, has just upped its stake - the latest to place its bets on a Cuban oil rush.

The 44-year-old U.S. trade embargo, meanwhile, continues to bar American companies from doing business with the Caribbean island. But, some observers are asking, can the U.S. really afford to risk losing out on valuable energy resources only 50 miles (80km) off Key West?

The prospect of nations such as China, Venezuela or India lining up to exploit Cuban oil has already led some politicians to call for the embargo to be relaxed.

They want U.S. oil companies to be able to bid for exploration rights - and for environmental laws to be relaxed to allow drilling in the adjoining U.S. waters.

Others insist the embargo must remain in force in order to keep pressure on Cuba's President Fidel Castro over human rights.

Cuba's share of the Gulf of Mexico was established in 1977, when it signed treaties with the U.S. and Mexico.

A U.S. Geological Survey report published last year estimates that 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas could lie within that zone, in the North Cuba Basin.

Cuba had already parceled its 112,000 sq km (43,240 sq mile) territory into 59 exploration blocks, which it opened up to foreign companies in 1999.

Initial test drilling results and rising oil prices have combined to make the potential deep-water reserves a promising prospect.

Six foreign companies have signed up for 16 of the blocks, according to Fidel Rivero, director general of Cuba's state oil company, CUPET.

Canadian firm Sherritt has taken the rights for four blocks and is already involved in on-shore oil production in Cuba, off Varadero - as is China. It gives an indication that the geology of the area must be extremely positive

Jorge Pinon, energy consultant India's ONGC announced its investment in two blocks on Sunday, saying it presented the opportunity of "great finds".

In May this year it agreed a 30% stake in a separate six-block venture with Spanish firm Repsol YPF. A further 30% share was taken by Norway's Norsk Hydro.

However, even if good quality reserves are found, he believes it will be at least five years before production really gets going because deep-water rigs are in short supply.

The debate over Cuba's potential oil reserves has been making waves in Congress. Our current policy doesn't serve our energy needs, environmental concerns, or economic principles

Congressman Jeff Flake This summer, Republicans Jeff Flake and Larry Craig introduced twin bills to the House of Representatives and Senate respectively that would exempt American "big oil" from the embargo.

Congressman Flake, who represents Arizona, described the ban on trade with Cuba as "archaic policy".

"Our current policy doesn't serve our energy needs, environmental concerns, or economic principles," he said. Two Florida Democrats, Senator Bill Nelson and Congressman Jim Davis, countered with rival legislation which would deny U.S. visas to the executives of foreign oil firms which drill in Cuban waters.

They warn of the potential environmental threat, should deep-water drilling lead to oil spills.

U.S. oil firms may play a waiting game on Cuban reserves The Cuban American National Foundation, an anti-Castro exile group based in Miami, has called instead for trade restrictions to be tightened further.

Speculation over a possible future thaw in U.S.-Cuba relations has been heightened by Fidel Castro's recent illness and temporary delegation of power to his brother, Raul.

Inter-American Dialogue Daniel Erikson, Caribbean programs director at the Inter-American Dialogue, a Washington policy group, points out that Cuba has said U.S. firms would be welcome to explore its waters. "It's being watched with a fair amount of interest by oil and gas companies in Texas and elsewhere," he said. However, he also sounds a note of caution. Few firms have the technology to drill deep enough to reach Cuba's potential oil reserves - and, if proven, their depth would make them costly to exploit. "