Argentina to compensate Repsol $5 bn over 2012 asset seizures

Spanish oil giant Repsol SA yesterday said that its board has agreed to accept the $5-billion compensation offered by the Argentinean government over the seizure of the company's operations in the country.

The approval ends a two-year bitter dispute, although the compensation is less than half the $10.5 billion demanded by Respol.

The agreement is subject to approval of Repsol shareholders and by the Argentinean Parliament.

Under the agreement, Repsol will receive Argentine sovereign bonds with a nominal value of $5 billion.

"I think to finally reach a friendly agreement on this contentious issue that has taken two years is extremely positive," said, Repsol chairman Antonio Brufau.

In 2012, the Argentinean government headed by President Christina Fernandez de Kirchner, seized Repsol's majority 51-per cent stake in Argentine oil company Repsol YPF on the ground that Repsol did not invest enough to keep pace with the rising demand for oil and gas required for the country's rapid economic growth. (See: Argentine senate okays YPF nationalization)

Repsol had refuted the charge, saying that the company had invested $20 billion in the country. It blamed Argentina's energy policies such as subsidies, price caps and export taxes for the production decline.

Other shareholders of Madrid-based YPF were Spain's Caixabank (12.8 per cent), engineering and construction company Sacyr (10 per cent), Mexican state-owned petroleum company Pemex (9.5 per cent) and the rest is free float.

The Spanish government strongly condemned the nationalisation and threatened to retaliate. The move was also widely criticised by the European Union, the US and the World Bank.

YPF, earlier a state-run company, was privatised in 1993 and acquired by Repsol in 1999.

YPF represented 42 per cent of Repsol's total reserves, and accounted for about 35 per cent of its revenue and more than 60 per cent of its oil production in 2011. (See details of the agreement: Argentina and Repsol reach compensation agreement over expropriation of YPF)