MADRID--Repsol S.A.'s (REP.MC) board Wednesday took a step
toward ending the company's conflict with Argentina over the
expropriation of its controlling share in an Argentine oil producer
by accepting the outline of a compensation deal worth $5
billion.
The Spanish oil major said it would open negotiations with the
Argentine government on details of the accord, including the legal
jurisdiction that would govern it, in order to find a "fair,
effective, and quick solution of the controversy."
The conversations will take into account "the appropriate terms
and guarantees to secure its effectiveness," Repsol said in a
statement after a board meeting that lasted several hours.
Repsol said it would hire an international investment bank to
help guide its negotiations with Argentina.
The tentative agreement comes after a 19-month diplomatic
standoff between Spain and Argentina over the expropriation of 51%
of YPF SA (YPFD.BA) in spring 2012.
The nationalization strained relations between Argentina and
Spain and threatened Repsol's investment-grade credit rating by
stripping the company of more than half its oil and gas production.
The Spanish oil company ended up with a 12% stake in Argentina's
biggest oil-and-gas company.
Spain retaliated by trying to block Spanish purchases of
Argentine biodiesel. Meanwhile, Repsol, which sought more than $10
billion for its YPF stake, moved to divest billions of dollars
worth assets to pay down debt. The company also launched lawsuits
to keep other oil companies from investing in Argentina and started
arbitration proceedings against Argentina with the World Bank.
Under the deal, which has the support the Mexican and Spanish
governments, Argentina and Repsol have said they'll drop all
lawsuits in the case.
A settlement would help Repsol as it seeks to grow outside its
main production areas of Latin America and northern Africa. It
could also help Argentina restore the confidence of investors as it
seeks billions of dollars in capital to exploit untapped
hydrocarbon reserves.
People familiar with the deal said that Repsol wouldn't reinvest
in Argentina or take part in the development of the big Vaca Muerta
field in the south of the country. It wasn't clear whether Repsol
would keep its remaining stake in YPF.
Write to Ilan Brat at ilan.brat@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires