Repsol agrees to negotiate deal with Argentina

Staff Writer
Columbus CEO

MADRID (AP) — Spanish energy firm Repsol said Wednesday that its board has approved negotiations for terms of payment by Argentina to compensate the Spanish company for last year's expropriation of the firm's YPF division and its vast holdings of unconventional oil and gas fields.

Investment bankers hired by Repsol will negotiate with Argentina "with the objective of finding a fair, effective and quick solution of the controversy," Repsol said in a statement after the board met to consider the proposed deal reached Monday in Buenos Aires by company executives, Spanish and Argentine officials and the chief executive of Mexico's state oil company, Petroleos Mexicanos, or Pemex, which holds a minority stake in YPF.

The Repsol statement did not list a value for compensation, but a person with direct knowledge of the preliminary deal put it at $5 billion in Argentine bonds denominated in U.S. dollars. In return, Repsol SA would drop legal action against Argentina for taking Repsol's controlling stake in YPF without payment, said the person, who spoke on condition of anonymity because they were not authorized to disclose details.

A finalized deal could pave the way for Pemex to join the exploration of the vast Vaca Muerta oil deposit in Argentina's Neuquen province, where YPF says 15 teams are already extracting more than 10,000 barrels a day.

The seizure of YPF last year infuriated Spain and led to harsh criticism of Argentina by the European Union, the United States and some Latin American leaders. Argentina had claimed Repsol was not investing enough in the South American country's oil industry — claims vigorously denied by Repsol.

But the expropriation of Argentina's former national oil company, privatized in the 1990s, was hugely popular among Argentines because many blame privatizations and other free-market policies of that decade for the country's economic crisis and debt default in 2001-2002.

Repsol had said its 51 percent stake in YPF was worth $10.5 billion in compensation and sued Argentina seeking payment.

The fight also strained ties between Spain and Argentina, and a statement released by Argentina's economy ministry released after the preliminary deal was reached said negotiators hoped the deal would "contribute to normalize and strengthen the historic ties between the three countries and their companies."

Argentina has the world's third-largest deposits of shale oil and gas, but needs international help to develop them. Only Chevron has so far made a commitment to help develop the fields, and it was subsequently sued by Repsol.