CNOOC says S.China Sea blocks tender progressing well

* CNOOC's tender may attract mid-tier firms --experts

* Some blocks located in disputed territorial waters

* Companies already working offshore Vietnam may shy away

By Chen Aizhu

BEIJING, July 17 (Reuters) - CNOOC, China's top offshore oil producer, said on Tuesday a tender issued last month to invite firms to bid for oil and gas blocks in the South China Sea is progressing well, attracting interest from companies including from some U.S.-based ones.

The state-run firm in late June invited foreign companies to jointly develop nine blocks in the western part of the South China Sea, a move Vietnam said was illegal because the blocks overlap its territorial waters and ownership is disputed.

"The tender moves on smoothly...we are following it up according to procedures," CNOOC chairman Wang Yilin told reporters on the sidelines of a U.S.-China investment seminar.

"I can tell you that some U.S.-based companies have expressed interest," said Wang, formerly a vice president of China's top energy group CNPC. CNOOC is parent of Hong Kong and New York listed CNOOC Ltd.

Wang didn't elaborate on the potential bidders, but industry experts said his comments echoed the Chinese government's recent vocal position on developing the strategic waters potentially rich in oil and gas.

But experts cautioned that the tender was unlikely to draw the interest of major intentional firms wary of escalating tensions between China and Vietnam, especially those already working offshore Vietnam such as Exxon Mobil, Russia's Gazprom and India's ONGC.

"Some of the blocks are known to be in the disputed waters. And since PetroVietnam has told companies not to take part in, few would have the appetite for that kind of risk," said Huang Xinhua of energy consultancy IHS.

It could however attract mid-tier or independent companies that have little vested interests in either of the two nations, analysts said. But, they added, even smaller ones would balk when it comes to making real investment decisions.

U.S.-based Harvest Natural Resources acquired a petroleum contract in 1996 from China to explore 6.2 million acres in the South China Sea, but the territory overlaps an oil block Vietnam awarded to Canadian firm Talisman Energy.

The U.S. firm has said it would not make "sizeable investments" in the disputed oil block until an agreement was reached between the claimant nations.

Harvest Natural Resources intends to extend its Chinese contract when it expires on May 2013 because of the block's high potential for gas. On the contrary, Talisman intends to conduct seismic measurements this year for possible exploration in the future.

In late June just several days after CNOOC's tender, chairman Wang told an internal meeting that the company should map out development and production plans with a focus of tapping major discoveries in the South China Sea.

He said development in the region would form a key part of achieving the company's ambitious goal to double its oil and gas production by 2020 and triply it by 2030 from 2010 levels.