Current natural gas prices in Brazil make the production of nitrogen-based fertilizers in the country “completely unviable,” Carlos Fávaro, Minister of Agriculture and Livestock, said on Aug. 27 at the 11th Brazilian Fertilizer Congress, according to S&P Global.
Fávaro said recent changes in the regulatory framework will boost domestic natural gas production and should reduce natural gas prices by half, however. S&P Global reported the current price of natural gas in Brazil at $14/MMBtu. The decision to allow direct market sales of gas from production-sharing fields will gradually decrease prices until 2030, Favaro said.
Natural gas prices are a point of legal dispute between state-owned oil and gas company Petrobras and Unigel, the struggling Brazilian chemical and fertilizer maker. Unigel earlier this year closed two nitrogen plants leased from Petrobras at Bahia and Sergip, blaming high natural gas prices (GM March 8, p. 34). Petrobras reportedly ended its contract with Unigel in June (GM July 5, p. 26).
Brazil is responsible for around 8% of global fertilizer consumption, ranking fourth behind China, India, and the US, according to S&P Global. The National Fertilizer Plan published by the Brazilian government states that more than 80% of the fertilizer used in Brazil is imported and costs $25 billion yearly, but the plan hopes to meet 45-50% of domestic demand with local products until 2050.
In the 1990s, Brazil was able to meet about 50% of its domestic fertilizer demand through local production, but a combination of increased demand and policies that favored imports over domestic production resulted in a significant decline in Brazil’s self-sufficiency in the sector. This shift was accompanied by the privatization of factories and a reversal of Petrobras’ involvement in the fertilizer industry after the 1973 oil shock, S&P Global reported.