Spain’s Repsol to decide on Argentina compensation offer

26 November 2013 18:44 Source:ICIS News

MEDELLIN, Colombia (ICIS)--Repsol’s board of directors will decide on Wednesday whether to accept a compensation offer from Argentina for last year’s seizure of Repsol’s majority share in Yacimientos Petroliferos Fiscales (YPF), the Spanish energy company said on Tuesday.

News of the offer emerged late on Monday after representatives from the Spanish and Argentine governments, as well as executives from Repsol, YPF and Mexican state oil firm Pemex, which holds a minority stake in YPF, met in Buenos Aires.

Repsol has been seeking around $10.5bn (€7.8bn) in compensation since Argentina’s government expropriated 51% of YPF in May 2012, following a dispute with the Spanish company over under-investment and dwindling production.

“The board of directors of Repsol, at its meeting to be held on Wednesday 27 November, will analyse and resolve as it deems appropriate in the sole interest of the company and its shareholders,” the company said in a statement.

Details of the preliminary offer were not disclosed. However, Reuters quoted sources close to the deal saying that Argentina had offered Repsol around $5bn in bonds and that the deal was “highly unlikely to be rejected” by the Spanish company.

In June, Repsol’s board rejected a noncash compensation offer from Argentina that included a 47% stake in a joint venture, valued at around $3.5bn, to exploit part of the vast Vaca Muerte shale formation in Argentina’s Neuquen province. The offer, described by Repsol as “unsatisfactory”, also included $1.5bn towards development. 

Argentina, which has struggled to attract much-needed investment in its hydrocarbon sector since the takeover, is also looking to swiftly end the 18-month dispute.

Argentina has the world’s second largest shale gas reserves, with an estimated 802 trillion cubic feet (tcf) of recoverable gas, according to the US Energy Information Administration (EIA). The country needs foreign investment to exploit this potential.

However, potential partners have been wary following Repsol’s decision to take legal action against companies that have partnered with YPF on the grounds of unfair competition.

($1 = €0.74)

By Simon West