Brazil's Petrobras nears full restart of fertilizer plants in Bahia, Sergipe states

Brazilian state-led oil company Petrobras will restart full ammonia and urea production by the end of January at two fertilizer plants in the country's northeast after years of shutdowns and delays, marking the company's much-anticipated return to the fertilizer production segment, according to the company.

The FAFEN-SE fertilizer plant in Sergipe state restarted ammonia production on Dec. 31 and urea production on Jan. 3, Petrobras said Jan. 13. Maintenance work at the FAFEN-BA fertilizer plant in Bahia state, meanwhile, was completed in December, with urea production scheduled to restart by the end of January.

The two fertilizer plants in Bahia and Sergipe states supply about 12% of Brazil's urea demand, according to Petrobras. FAFEN-SE can produce up to 1,800 mt/d of urea and 1,250 mt/d of ammonia, as well as 1,500 mt/d of carbon dioxide. FAFEN-BA has an installed capacity to produce about 1,300 mt/d of urea and ammonia, as well as gasoline additive Arla 32.

Petrobras resumed control of FAFEN-BA and FAFEN-SE after the company reached a deal in May 2025 with Proquigel, a unit of local petrochemicals producer Unigel Participacoes, to settle a legal dispute over a prior leasing contract for the two plants. The resolution of the dispute allowed Petrobras to launch a tender for an operations and maintenance contract to restart production in September.

Proquigel had previously operated the plants under a 10-year lease signed in 2019, but the company was forced to suspend operations in 2023 amid a spike in natural gas prices and other terms related to the deal. Petrobras and Proquigel then signed tolling contracts in January 2024, which were subsequently suspended amid questions by federal auditors.

The restart of fertilizer production at the two plants marked the latest advance in Petrobras' return to the segment, which is seen as an important stimulator for natural gas demand in Brazil. The restarts were also seen as a way to reduce Brazil's need to import fertilizers to meet domestic demand from the country's massive agricultural sector.

Brazil has historically imported nearly 80% of phosphate fertilizers, more than 80% of nitrogen fertilizers and more than 90% of potassium fertilizers, according to Brazil's National Fertilizers Council, or Confert. Petrobras' latest investments in fertilizers, forecast at $1 billion in the 2026-2030 period, aim to meet about 20% of domestic urea demand by the end of the five-year period, according to the company.

Petrobras previously restarted urea production at the Araucaria Nitrogen Fertilizers, or ANSA, plant in Parana state in August. Petrobras hibernated the facility in 2020 at the height of the global coronavirus pandemic.

"Actually, all of the urea consumed in Brazil is imported," said William Franca, Petrobras' director for industrial processes and products. "With the restart of national production, Petrobras increases supplies of the materials in the domestic market, reduces dependence on imports and strengthens the agribusiness supply chain."

Return to fertilizers

Petrobras largely exited the fertilizer sector in the late 2010s after the company and former executives were embroiled in a wide-ranging corruption scandal involving local politicians, engineering firms and construction companies. The scandal cut Petrobras off from global capital markets, forcing the company to sell off non-core assets to finance the development of subsalt fields offshore Brazil.

President Luiz Inacio Lula da Silva ended the asset sales and requested that Petrobras return to key domestic segments. Lula and his Workers' Party, or PT, favor a state-led model for economic development that has often utilized Petrobras as an investor of last resort in key sectors such as fertilizers.

In addition to the restart of fertilizer production in Bahia, Parana and Sergipe states, Petrobras is also conducting studies that could lead to completion of the UFN-III fertilizer plant in Mato Grosso do Sul state. Work on the plant began in 2011 but was halted in 2014, at approximately 80% complete, because of the corruption scandal.

The UFN-III plant was expected to have an installed capacity to produce 2,200 mt/d of ammonia and 3,600 mt/d of urea, accounting for about 15% of domestic urea demand, according to Petrobras. Petrobras previously estimated that completion of the fertilizer plant would cost about $900 million, with the plant expected to start production in 2028.

"The two FAFENs together with ANSA will respond for 20% of all urea demand in Brazil," Franca said. "Our expectation is to elevate national production to 35% over the next few years with the new plant in construction in Mato Grosso do Sul."