Repsol CEO Antonio Brufau
Repsol CEO Antonio Brufau Reuters

Argentina may pay Spanish energy company Repsol SA (OTCMKTS:REPYY) $5 billion in compensation for the country’s takeover of the energy company’s majority stake in YPF SA (NYSE:YPF) and its holdings in unconventional oil and gas fields, a source close to the deal told the Associated Press on Tuesday.

Repsol would receive the money in Argentine bonds, the majority denominated in U.S. dollars. In return, the Spanish energy company would drop legal action against Argentina for taking control of its YPF stake in 2012 without payment, AP reports. Repsol's board will review the terms of proposal on Wednesday.

The Spanish company owned 51 percent in YPF and was suing Argentina for the $10.5 billion in compensation.