BUENOS AIRES, Nov. 26 (UPI) -- Argentina and major Spanish oil producer Repsol are nearer a compromise over last year's government unsettling seizure of Repsol unit YPF.
Not only did the nationalization sour relations between Buenos Aires and Madrid, it is still hampering Argentine efforts to draw international investors to the South American country.
Argentine government sources quoted in government-backed media gave scant details, and Repsol declined comment on reports it was offered $5 billion compensation, about half of what it demanded after YPF's nationalization.
But the talks in Buenos Aires, attended by senior Repsol executives and Spanish government officials, did move forward, the reports said, if only because Argentine needs a less quarrelsome Spain to go ahead with its plans for preparing nationalized YPF for bigger things.
Energy giant Chevron pledged support to those plans, despite objections from Repsol, but the government of President Cristina Fernandez is nowhere near implementing its plan to reinvent YPF and develop the country's newly found shale oil reserves.
Argentina spends about $15 billion a year on oil and gas imports and the shale reserves are seen as a panacea for the country's growing energy dependence. The shale-oil and gas deposits in Neuquen province were discovered by Repsol just before it lost YPF to the government takeover.
The deposits are considered enough to eliminate Argentina's energy import bill but industry estimates show developing them will cost more than $60 billion.
The Vaca Muerta, or Dead Cow, shale deposit is said by experts to hold 16 billion barrels of shale oil and 308 trillion cubic feet of shale gas. If properly developed, the shale bonanza potentially will make Argentina the world's fourth-largest producer of shale oil.
The shale gas reserves in Argentina are estimated to be the world's third-largest, after China and the United States.
Argentine compromise proposals have included offers to Repsol to return and develop the shale reserves, an offer received with little enthusiasm in Madrid.
Repsol's 51 percent share in YPF was seized by Fernandez after charges the company didn't invest enough of its local earnings into developing YPF's energy potential. Repsol denied the accusation, Argentina's main reason for nationalization, and pressed for more than $10 billion in compensation.
Repsol has made clear to Argentine it will continue to obstruct Vaca Muerta development and challenge Argentine efforts to bring in other companies unless it is adequately compensated.
Argentine Ministry of Economy officials said an "agreement in principle" for compensating Repsol had been reached but did not outline its terms.
The ministry's statement, however, said the agreement provides that "both sides will end their respective legal actions" once an agreement is in place. Analysts said it was more important for Argentina not to have a litigant and hostile Repsol in its way as it tries to exploit Vaca Muerta potential for giving it energy independence.
The talks so far have involved, on Argentina's side, new Economy Minister Axel Kicillof, YPF Chief Executive Officer Miguel Galuccio and Argentine Ambassador in Madrid Carlos Bettini. The Spanish side included Spanish Industry and Tourism Minister Jose Manuel Soria, and Repsol's Exploration and Production Director Luis Cabra and operations chief Nemesio Fernandez Cuesta.
The reconciliation effort is led by Petroleos Mexicanos, or Pemex, which holds 9.5 percent of Repsol and has been outspoken in its criticism of Repsol management and less so of Argentina.
In a previous mediation bid last June, Pemex proposed a joint venture that could include Repsol, YPF as well as Pemex and exploit the Vaca Muerta shale deposits. Repsol's board rejected the initiative.