Brazil's Petrobras OKs completion of fertilizer plant in Mato Grosso do Sul state

The board of Brazilian state-led oil company Petrobras has approved the completion of the UFN-III fertilizer plant in Mato Grosso do Sul state as part of the company's ongoing return to the fertilizer sector and expansion of natural gas projects under its $102 billion investment plan for 2024-2028.

"The investment estimated to complete the UFN-III is about $614 million, and operations are expected to start in 2028," Petrobras said in a regulatory filing after markets closed Oct. 25. Work on the Unidade de Fertilizantes Nitrogenados, or UFN-III, fertilizer plant at Tres Lagoas was halted at about 80% complete after Petrobras became embroiled in the 2014 "Car Wash" corruption scandal. Petrobras hibernated the project in 2015.

Petrobras restarted investments in the fertilizer segment amid efforts by President Luiz Inacio Lula da Silva and his Workers' Party, or PT, to utilize the country's growing natural gas output from offshore subsalt fields to meet domestic fertilizer demand. Brazil imports about 85% of its fertilizer needs. Petrobras also started work on the idled Araucaria Nitrogenados, or ANSA, fertilizer plant in Parana state in August, while also evaluating renewed production from plants in Bahia and Sergipe states.

The primary raw material for the fertilizer plants will come from the prolific subsalt region, where the multibillion-barrel oil fields also contain hefty volumes of associated gas. The government expects installation of new floating production units, offshore export infrastructure and onshore gas processing plants to combine with a more-liberal regulatory regime to boost supplies and kick start industrial activity, while also helping reduce emissions as part of the country's energy transition.

Brazil produced 159.7 million cu m/d in August, up 7.9% from 147.9 million cu m/d in August 2023, the National Petroleum Agency, or ANP, said in a production report Oct. 1. Oil companies, however, continue to inject massive volumes of gas for reservoir management, the ANP data showed. In August, 86.6 million cu m/d were reinjected and 54.3 million cu m/d were available for commercial sale.

The start of commercial operations at the Route 3 offshore gas export pipeline and a new gas treatment plant at the Petrobras-operated Complexo de Energias Boaventura industrial park was expected to unlock additional gas supplies in the fourth quarter. The export pipeline has installed capacity to transport 21 million cu m/d, while the treatment plant can process up to 18 million cu m/d from subsalt fields, according to Petrobras.

Expanded investments

The latest project approval underscored Petrobras' continued focus on completing delayed projects and restarting idled plants as the core of its return to the fertilizer industry.

The UFN-III fertilizer plant will have installed capacity to produce 1.2 million mt of urea and 70,000 mt of ammonia each year, according to Petrobras. The plant will serve Brazil's agricultural heartland in Mato Grosso, Mato Grosso do Sul, Goias, Parana and Sao Paulo states.

"The project will be built with the latest fertilizer production equipment and technology, resulting in elevated efficiency at the plant," Petrobras said.

The $158 million project to restart production at ANSA, meanwhile, will add 720,000 mt of urea and 475,000 mt of ammonia per year, Petrobras said in August. Fertilizer output, which was halted in 2020 during the global coronavirus pandemic, is expected to start in the second half of 2025.

Petrobras also wants to restart production at the Fabrica de Fertilizantes-Bahia, or FAFEN-BA, fertilizer plant in Bahia state and the Fabrica de Fertilizantes-Sergipe, or FAFEN-SE, plant in Sergipe state, which were part of a controversial tolling contract with local petrochemicals company Unigel. Unigel had operated the plants under a 10-year lease signed in 2019, but production was halted and Petrobras suspended gas deliveries in 2023 after a spike in prices.

FAFEN-BA, has installed capacity to produce about 1,300 mt/d of urea as well as gasoline additive Arla 32 and ammonia. FAFEN-SE can produce up to 1,800 mt/d of urea.