Brazil’s Unigel on March 6 announced that it has temporarily stopped production at its two nitrogen fertilizer factories at Bahia and Sergipe. It noted that a temporary tolling agreement with Petrobras (GM Jan. 5, p. 1) has not yet come into force and that it still depends on the fulfillment of conditions precedent. It said once the conditions are met, Unigel will be able to reevaluate the resumption of production.
Unigel said that when it entered the fertilizer sector in 2020, it believed in opening the free natural gas market in the country and invested around R$600 million in the two nitrogen fertilizer factories leased from Petrobras, which use natural gas as their main raw material, generating some 600 direct jobs.
In addition to supplying some 15% of the nation’s nitrogen fertilizers, Unigel noted that it is the only national producer of ARLA, an additive added to diesel engines to reduce the emission of polluting gases.
It said the price of natural gas in the country is still among the highest in the world, costing up to six times more than in the Middle East and the US. Unigel said it suffered losses throughout 2023 and also into 2024, but even so retained the majority of its staff in the expectation that negotiations to reduce the price of natural gas would be successful.
Unigel said it will continue to have a minimum infrastructure for the maintenance and preservation of its assets. In addition to ensuring compliance with legal and socio-environmental commitments, Unigel said it will maintain social projects and support for schools in the states of Bahia and Sergipe.
Unigel also reported that it was subjected to analysis by the Federal Court of Auditors (TCU) for reasons of internal governance of Petrobras, the state-owned company, of which Unigel is unaware and does not participate, having acted regularly during negotiations.
Petrobras concluded that an investigation into possible interference by two of its directors in a procedure that led to a tolling contract with Unigel found no confirmation of irregularities, according to Bloomberg, citing a filing by Petrobras.
Petrobras said the investigation was fully monitored by KPMG, which carried out additional tests and examined procedures and controls applicable to the entire process. Petrobras said information that the conclusion of the contract did not observe all the relevant procedures and procedures was unfounded. The company said the agreement complied with bylaws.