Petrobras Greenlights Bid to Revive Idled Fertilizer Plants as Brazil Seeks to Cut Imports

Brazil’s state-run Petrobras has taken a major step toward reviving two shuttered fertilizer plants, approving a tender process to select a new operator—but the move remains stalled by an ongoing legal battle with current leaseholder Unigel. The plants, located in Bahia and Sergipe states, are central to President Luiz Inácio Lula da Silva’s strategy to slash Brazil’s dependence on imported fertilizers, which currently supply over 80% of the country’s needs.

Why the Restart Matters

• Agricultural Vulnerability: As the world’s top soybean exporter and a major corn producer, Brazil’s farming sector is hostage to global fertilizer prices and supply chains.
• Unigel’s Shutdown: The plants—leased to Unigel in 2019—halted operations in 2023 due to sky-high natural gas costs, a key input for nitrogen fertilizers.
• Lula’s Vision: Reducing imports aligns with the president’s economic nationalism, but progress hinges on resolving the Petrobras-Unigel standoff.

Sticking Points

• Compensation Demands: Unigel seeks reimbursement for losses tied to the shutdown, while Petrobras disputes liability.
• Arbitration Roadblock: The two firms are locked in arbitration over gas supply terms, investments, and lease violations—delaying the tender.
• Unigel’s Wildcard: If settled, Unigel itself could bid to regain control of the plants.

Broader Context

• Global Fertilizer Crisis: War in Ukraine and supply disruptions have exposed Brazil’s reliance on Russia, China, and Morocco for key nutrients.
• Gas Price Challenge: Petrobras must secure affordable domestic gas to make the plants viable long-term.

What’s Next?

1. Negotiations: A settlement with Unigel is required before the tender launches.
2. Bidding War: Chemical firms and agribusiness players may compete to operate the facilities.
3. Political Pressure: Lula’s team will push for rapid resolution ahead of the 2024 planting season.