Spanish oil group Repsol's board Wednesday backed a draft multi-billion-dollar compensation deal over Argentina's 2012 seizure of the company's YPF subsidiary.
The deal seeks to repair the financial hit taken by Repsol when Argentina's President Cristina Kirchner stunned the international financial community in April 2012 by ordering the nationalisation of Repsol's 51-percent stake in YPF.
"The board has analysed and judges positively the compensation agreement announced by the Argentine government for the expropriation of Repsol's 51-percent shareholding in YPF," the Spanish group said in a statement.
To develop the draft accord, Respol said it had decided to launch talks shortly between its teams and the Argentine government so as to find a "fair, effective and quick solution to the controversy".
The talks must deal in particular with the "terms and guarantees" required for the deal to be effective, Repsol's board said. The firm said it had agreed to hire a "prestigious international investment bank" for the negotiations.
The expropriation of YPF, which Kirchner blamed on Repsol's failure to make agreed investments in the firm, soured relations between Argentina and Spain and sparked an international chorus of outrage including from Spain's European Union partners.
This week, however, Argentina's government said it had struck a preliminary deal with Spain in talks in Buenos Aires, news that sent Repsol shares surging.
The exact value of the agreed compensation has not been officially released but a source close to the matter said it amounted to $5 billion in Argentine government bonds.
The deal stipulated the withdrawal of legal actions underway, Argentina said.
After the YPF grab, Repsol filed a complaint against Argentina with a World Bank arbitration panel, seeking $10.5 billion, and sued in a New York court seeking an undetermined amount of damages.
On January 26, Repsol had rejected a settlement offer valued by Argentina at $5 billion, saying it was worth considerably less and included a minority share in a deposit along with only $1.5 billion in cash, which had to be invested in a local company.
Settlement of the legal tangle could help to lure investment into the vast Vaca Muerta shale oil and gas field in Argentina, discovered by YPF in 2010.
It is estimated to contain the equivalent of 22.8 billion barrels of oil, described by Repsol at the time as the largest discovery in its history.
Vaca Muerta, or Dead Cow, was so called because cattle could not survive the desert terrain.
But foreign investors have been reticent, showing concern about Argentina's interventionist economic policies since its 2002 sovereign debt default and a threat by Repsol to sue future partners of YPF.
The draft YPF compensation agreement was reached between the governments of Argentina, Spain and Mexico.
The talks brought together Argentine Economy Minister Axel Kicillof, Spanish Industry Minister Jose Manuel Soria and the chief executive of Mexican state-owned oil firm Pemex, Emilio Lozoya Austin.
Pemex, which owns a 9.5-percent stake in Repsol, said the board's backing of the deal was "a good signal" that could "prevent a long and complex process with an uncertain outcome."