(Adds Lula comments on meeting with Fidel Castro)
By Rosa Tania Valdes
HAVANA, Oct 31 (Reuters) - Brazil's state-owned oil company Petrobras signed an agreement on Friday to explore for oil in Cuba's untapped offshore fields, which Cuban energy officials say may hold over 20 billion barrels of reserves.
Brazilian President Luiz Inacio Lula da Silva and Cuban President Raul Castro attended the signing ceremony and both expressed confidence that plenty of oil will be found.
"God can't be so unjust that we won't find anything," Castro said.
"Don't worry, Raul," Lula told him. "We're going to find it here and we're going to transform it into energy." Petrobras is one of the world's top offshore oil producers.
The signing ceremony was part of a quick visit by Lula, who also met with former Cuban leader Fidel Castro for a two-hour conversation in which he said the ailing 82-year-old was "totally lucid."
"I told Fidel that when I arrived to visit him, he looked down and after half an hour of conversation it seemed that the sick one was me," he said of Castro, who has not been seen in public since undergoing intestinal surgery in July 2006.
A big oil find could bring new prosperity to Cuba, which produces 60,000 barrels per day from offshore wells, but imports 90,000 bpd from Venezuela.
State-owned Cubapetroleo, or Cupet, surprised the oil world two weeks ago when it said it believes it has at least 20 billion barrels of oil offshore -- more than twice the generally accepted top estimate.
Cupet said the figure was based on comparisons with similar geological structures in nearby U.S. and Mexican waters.
Outside experts say such numbers are not impossible but no one can know until drilling takes place.
Only one test well has been drilled off Cuba's coast, by a consortium led by Spanish oil company Repsol-YPF, which is expected to drill a second well next year.
"I have full confidence that we're going to find oil for various reasons -- because the others (U.S. and Mexico) have oil, because we are already extracting some and due to the capacity of the Brazilian company," said Raul Castro, who formally replaced his brother as president in February.
Cuba has divided its offshore area in the Gulf of Mexico into into 59 blocks, 29 of which have been leased for exploration to companies from around the world, but not the United States which maintains a trade embargo against Cuba.
The fields include onshore wells that use horizontal drilling to draw oil from reservoirs several miles offshore.
Petrobras' block off Cuba's northern coast east of Havana covers 600 square miles (1,600 square km) and includes waters 1,640 feet (500 metres) to 5,250 feet (1,600 metres) deep.
Petrobras will make an initial investment of $8 million to begin analysis of its block. The contract gives the Brazilians seven years to explore and 25 years to produce oil and gas in a production-sharing contract with Cuba. (Additional reporting by Nelson Acosta; editing by Tom Brown and Mohammad Zargham)