Negotiations will set a compensation amount that will have to be agreeable to the Spanish oil giant which had held a 51 percent share of Argentina's YPF.

The agreement to negotiate means that the parties will cease litigation and other action in the case. Repsol had put the value of its loss at $10 billion, and filed for help with the International Centre for Settlement of Investment Disputes.

“Both parties agree that the draft deal will help normalize and strengthen the historic links between the three countries and their companies,” read a short communiqué by the Argentinian government.

Argentina's leftist government in April 2012 decided to nationalize YPF, in which Repsol had controlling interest, sparking a major diplomatic row.

Buenos Aires argued that the Spanish company was not investing enough in the Argentine company and using it only to extract profit.

Argentina 's Economy Minister Axel Kicillof, the driving force behind YPF's expropriation, described Repsol's approach as the "debasement of the company and a policy of creating shortages that would raise domestic prices to those prevailing internationally."

Pemex holds 9.5 percent of Repsol's capital.