Argentina offers Spain's Repsol $5 billion compensation for expropriation of YPF unit

MADRID – Spanish energy company Repsol would get $5 billion in compensation from Argentina for the expropriation last year of the firm’s YPF unit and its vast holdings of unconventional oil and gas fields, a person with direct knowledge of the preliminary deal said Tuesday.

Under terms of the proposal to be considered Wednesday by Repsol’s board, the Spanish company would get the money in Argentine bonds denominated in U.S. dollars. In return, it would drop legal action against Argentina for expropriating Repsol’s controlling stake in YPF in 2012 without payment, said the person, who was not authorized to disclose details and spoke on condition of anonymity.

Investors on Tuesday cheered the news, sending Repsol shares up 4.28 per cent to close at 19.24 euros ($26.03) in Madrid.

News of the deal came late Monday after Repsol executives met in Buenos Aires with government officials from Argentina and Spain and the chief executive of Mexico’s state oil company, Petroleos Mexicanos, which holds a minority stake in YPF.

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

Argentina’s Economy Minister Axel Kicillof, the mastermind behind the YPF expropriation, remained coy about the compensation deal. “The agreement is somewhat confidential because you can’t just go around carelessly throwing out values,” said Kicillof, who is now leading Argentina’s negotiations. “It could affect shareholders and affect the stocks.”

Kicillof said that at the time of the takeover, Repsol was too hasty when it demanded $15 billion in compensation and later $10.5 billion.

“The Argentine state acted with a lot of prudence and sobriety,” he said. “We’re waiting to know more about the company to be able to give it a fair value, but I think Repsol acted rash by giving out just the numbers they wanted.”

The values and instruments of the deal will remain secret until Repsol’s board votes on the proposal on Wednesday, Kicillof said. He added that Argentina is satisfied with YPF’s performance after it seized control of its leading oil company from Spanish hands.

“But we’re now here to look forward,” he said. “We want to finish determining these values to close this deal once and for all.”

The seizure of YPF 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 SA was not investing enough in the South American country’s oil industry — claims vigorously denied by Repsol.

The expropriation of Argentina’s national oil company, which was 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 per cent 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 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.


Associated Press writer Almudena Calatrava in Buenos Aires, Argentina contributed to this report.