Nitrogen+Syngas 382 Mar-Apr 2023
31 March 2023
Nitrogen in Latin America
LATIN AMERICA
Nitrogen in Latin America
Brazil’s agricultural industry continues to expand at the same time that most of its nitrogen fertilizer industry has shut down. Meanwhile, Venezuela continues to deal with the consequences of years of underinvestment and mismanagement, and elsewhere, gas discoveries in other parts of the continent have not led to the new plant construction boom that had once been hoped for.
South America and the Caribbean collectively has a population of 670 million people, or about 8.5% of the world’s total. Collectively it also has about 1.15 million km2 of arable land, just under that of Russia or China, and about 7.5% of the world’s total. Yet it is also a key exporting region for a number of key crops, representing 13% of global agricultural production and 17% of food crop exports, including maize and soybeans, as well as being a major exporter of beef and poultry. Brazil is the dominant agricultural nation, representing around half of this production, and Argentina represents another two thirds of what remains.
From the 1960s and 70s, the region underwent the ‘green revolution’ along with south and east Asia, with increasing quantities of fertilizer and modern production techniques expanding output almost threefold. The region continues to be a key buyer of fertilizers, though in spite of plentiful resources it has struggled to develop a domestic fertilizer industry to supply this, especially on the nitrogen side.
Brazil
Brazil remains the economic powerhouse of the region, with the 8th largest economy in the world at purchasing power parity. Since the mid-2000s, Brazil has accelerated its transformation from an exporter of mainly tropical agricultural products such as coffee, sugar, citrus, and cacao to a major global supplier of commodities, including soybeans, grains, cotton, ethanol, and meats. But after a decade of growth during the 2000s, the 2010s were a difficult time for Brazil, with a major recession and the Operation Car Wash scandal that saw the impeachment of president Dilma Rousseff and the imprisonment of former president Lula da Silva, as well as forcing a massive restructuring on state oil company Petrobras. More recently the country has struggled with covid, high inflation and debt and weak growth.
In terms of fertilizer demand, Brazil’s fertilizer use has been growing over the past decade, and accelerated from 20182021, with nitrogen use rising for 4.3 million tonnes N to 5.0 million tonnes N. Overall Brazilian nitrogen demand represents about 60% of that for the whole of Latin America, and this is serviced particularly in the form of urea – Brazil’s demand for urea reached 7.1 million t/a in 2020, according to IFA figures. But Brazil imports 80% of its fertilizer needs, and it has been almost uniquely vulnerable to the sanctions that followed the Russian invasion of Ukraine. Around 25% of Brazil’s fertilizer imports come from Russia, with another 8% from Belarus. Although it has been potash and phosphate that has been most badly affected by the war, and urea has been relatively plentiful, it is nevertheless estimated that nitrogen use fell by 8-10% during 2022 because of high prices; the knock-on effect of the gas supply crisis in Europe. Farmers have delayed fertilizer applications, and a large stock of urea has built up in Brazil.
The reason for Brazil’s import dependence has been the decline of the country’s domestic fertilizer sector. On the nitrogen side, there were four main producing sites; two urea plants owned by state oil and gas company Petrobras at Camacari and Laranjeiras, with a combined capacity of 1.0 million t/a; a third 660,000 t/a urea plant at Araucaria which was privatised in 1993 as Ultrafertil, and an industrial grade AN plant at Cubatao. Ultrafertil was bought by Bunge, and then mining giant Vale in 2010, but in 2017 Vale divested its fertilizer division to Mosaic, with the exception of the nitrogen unit, which came back under the control of Petrobras.
Petrobras had also been trying to develop three new fertilizer complexes, at Linhares, Uberaba and Tres Lagoas, at a total cost of $6.5 billion, with the strategic goal of reducing or ending Brazil’s dependence on nitrogen fertilizer imports. However, the lack of additional natural gas availability, and the severe recession Brazil was facing led to Linhares and Uberaba being cancelled, and work at Tres Lagoas, where a 720,000 t/a ammonia plant and 1.2 million t/a urea were reportedly 80% complete, being halted in 2014.
Petrobras further added to Brazil’s nitrogen deficit in March 2018 when it closed down the Camacari and Laranjeiras plants because of poor economics. Since then Petrobras has tried to find a buyer for its urea units, with Russia’s Acron interested at one stage. But in 2020, in the wake of the failure of the Acron deal, the Araucaria plant was also idled, taking away Brazil’s last domestic urea capacity. Yara were reportedly in negotiations to buy Araucaria last year, but again no final sale was agreed. Attempts to sell the unfinished UFN-III plant at Tres Lagoas have likewise come to nothing.
Seeking to remedy this, last year the Brazilian government launched its 2022-2050 National Fertilizer Plan, which aims to reduce the country’s dependency on imported fertilizers. Among its goals, the plan aims to promote domestic production of fertilizers, as well as the research, development, and innovation environments related to the production and distribution of fertilizers, and the development of logistics infrastructure for its supply chain. It is targeting an increase in the market share of domestically-produced fertilizers from the current 15% to 55% by 2050, also assuming a doubling in demand over the period. It also hopes to attract more foreign investment in Brazil’s fertilizer sector. The plan has established an inter-ministerial National Council on Fertilizers and Plant Nutrition (CONFERT), designed to set initiatives and specific goals, coordinate with other federal strategic plans, and establish public-private cooperation related to fertilizers and plant nutrition products.
“The Brazilian government… aims to reduce the country’s dependency on imported fertilizers.”
The plan also includes incentives to increase the use of organic fertilizers, financial investments in research and visits to producers across the country by the Brazilian Agricultural Research Company (Embrapa) to promote the increased efficiency in the use of fertilizers and inputs in the field. The government expects this to reduce Brazil’s fertilizer demand by 20% over the medium term.
Argentina
Argentina is Latin America’s other major agricultural producer, and consumer of fertilizers. Urea consumption was 2.3 million t/a in 2020. Argentina is an important global producer of maize, exporting 37.5 million t/a of maize in 2021/22 which accounted for 18.5% of global maize exports. However, domestic agriculture has been suffering from extremely dry conditions due to three successive La Niña events, in the southern hemisphere summers of 2020/21, 2021/22, and 2022/23. As with Brazil, high nitrogen prices have also priced some farmers out of the market, and fertilizer consumption dropped 7% last year.
Production, following the closure of the Bunge Campana urea/UAN plant in 2017, is from a single 1.3 million t/a urea plant, Profertil at Bahia Blanca, co-owned by Argentinian oil and gas firm YPF and North American fertilizer produce Nutrien, which almost exclusively produces for the domestic market. Even so, Argentina has to import urea to make up for the shortfall in production. Various plans are circulating for additional capacity in Argentina. Profertil has examined the possibility of a second train, a Chinese investor has discussed a plant at Tierra del Fuego using gas from the fields at the southern tip of South America, and Indian producer Iffco launched a feasibility study in 2021 on building a ‘nano-urea’ plant in Argentina. So far, however, no firm plans have emerged.
Bolivia
Bolivia is not a major consumer of fertilizer but has large gas reserves, discovered in the late 20th century, which have attracted numerous ammonia/urea project ideas. Bolivia supplies natural gas via pipeline to Brazil, and a site on the pipeline at Bulo Bulo, in the centre of the country, was chosen to build an ammonia/urea plant, under the auspices of state oil and gas company YPFB. After a long and difficult development process, the 726,000 t/a urea plant finally became operational in 2017, with around 85% of its output being exported to Brazil and Argentina. However, the plant has had an equally troubled production history, and did not cover its costs. It was shut down in 2019, and became mired in Bolivian internal politics following the disputed re-election of president Morales and the year long temporary government of president Jeanine Anez. The plant was ‘re-engineered’ to replace degraded equipment items, and started up again in September 2021. Since then it has run relatively smoothly, at about 80% capacity. YPFB is now reportedly looking at a second, larger urea train of around 4,000 t/d (1.3 million t/a), at the same site.
Chile
Chile has no nitrogen fertilizer company, but explosives producer Enaex operates 850,000 t/a of ammonium nitrate production at Mejillones for explosives production. The site began operating in 1983, and has grown to four AN trains over the succeeding decades, the most recent capacity increase being in 2010. There is no domestic ammonia production, however – ammonia is bought in to feed downstream nitric acid and ammonium nitrate production. The site’s ageing ammonia plant was sold, dismantled and transported to be rebuilt in China in 2013.
However, Enaex has become interested in the possibility of using renewable energy in Chile to generate ammonia. An 18,000 t/a ‘green’ ammonia demonstrator plant is under development, licensed by KBR, with completion expected in 2025, and up to 1.3 million t/a of solar and wind-powered green ammonia capacity is at the feasibility study stage.
Mexico
Mexico is the third largest consumer of urea in Latin America, at 1.8 million t/a in 2020. State-owned Petroleos Mexicanos (Pemex) operated several 1950s vintage ammonia and urea plants at Cosoleacaque, Chihuahua and Salamanca, but high gas prices forced the closure of most of this capacity in the late 1990s. In 1996 Mexico produced 2.5 million t/a of ammonia and 1 million t/a of urea, but by 2000 ammonia production had fallen to 920,000 t/a, and by 2005 just 500,000 t/a. As a result, like Brazil and Argentina, Mexico has ended up importing most (ca 65%) of its nitrogen fertilizer needs. Attempts to refurbish plants and restart production at Cosoleacaque have been stymied by Mexico’s gas pipeline network, which does not connect the production sites in southeastern Mexico to the more extensive pipeline network in the north of the country, which is able to import cheaper natural gas from the United States. The solution was to have been to build a new urea plant at Topolobampo, Sinaloa state, on Mexico’s west coast, but the 770,000 t/a ammonia and 700,000 t/a urea facility has faced local environmental opposition, and has been mired in legal challenges since 2014.
Last year, the high price of nitrogen fertilizer affected Mexico in much the same way as Brazil, as Mexico also sourced around 25% of its urea from Russia. The government of president López Obrador signed a deal with the US to import ammonium sulphate as a stopgap, but also announced an ambitious $500 million investment plan to reactivate urea production at the southern sites to guarantee the supply of fertilizer to small producers. The government is targeting 2,500 t/d (825,000 t/a) of domestic urea production, but it remains to be seen if this plan will be any more successful than previous attempts to revive production. In the meantime, there are plans for green ammonia/urea production in Mexico, with a company called Tarafert aiming to produce 200,000 t/a of green ammonia and downstream urea in three tranches, with the first 66,000 t/a unit starting production in 2026.
Venezuela
Moving to the Caribbean, Venezuela developed a gas-based urea industry at three complexes on its northern coast in the 1980s and 90s; Nitroven at Zulia in the west, Fertinitro at Jose in the east, and Pequiven’s Puerto Moron in between the two. Venezuela’s production capacity totalled 2 million t/a of urea and 1.5 million t/a of methanol. Most of the plants were state-owned, but Fertinitro, completed in 2002, was a joint venture between state petrochemical major Pequiven (35%), Koch Nitrogen (35%), Snamprogetti (20%) and Empreseas Polar (10%). Koch became involved after PCS Nitrogen pulled out of the project in the late 1990s.
But Venezuela’s descent into political and economic chaos over the past two decades has seen foreign investment chased out of the country, the nationalisation of Fertinitro in 2010, and lack of money for repairs and maintenance of existing facilities. A plan to develop a plant jointly with Iran failed to get off the ground, though Pequivendid complete a second, 2,200 t/d ammonia-urea plant at Moron with financial support from China, which began production in 2014. Production at all of the plants continues to be dogged by interruptions in electricity and gas supply, and the 1.2 million t/a El Tablazo complex at Zulia has been idled since 2012.
Trinidad
Finally, mention must be made of Trinidad. Trinidad established a major ammonia and methanol industry in the 1980s and 90s on the back of cheap natural gas, with the US, which was facing high gas prices, as a natural market. Trinidad rode high through the 2000s, but was not replacing gas reserves and production at the rate that it was using it, because the government was not paying enough o incentivise the exploration and development of new reserves, and by the end of the decade the country was starting to face gas shortages, which became more acute during the 2010s. Production fell from 38.7 bcm in 2011 to 23.7 bcm in 2021, and in order to maintain LNG exports, domestic consumption fell by 25% during that time. LNG exports represent half of all Trinidad’s gas use, and ammonia and methanol production each use another 18% of Trinidad’s gas output. The gas price shortages have led to lower operating rates and stoppages among Trinidad’s nitrogen and methanol producers. At the same time, the rise in US shale gas capacity has led to restarts and production expansions in Trinidad’s major market.
There are some encouraging signs, however; Shell began production at the new Colibri field last year, and belatedly the government is changing its tax and incentives structures to encourage more gas drilling. Likewise the shortage of European ammonia and methanol caused by the gas price crisis and Russian sanctions gave Trinidad a ready market across the Atlantic last year and into this, making up for the loss of the US market for ammonia and methanol. Downstream, Trinidad has 4,100 t/d of urea capacity in three plants, though the large AUM plant uses much of its urea to make UAN solutions for the US market.
Untapped potential
In spite of abundant gas reserves around the continent, Latin America has struggled to develop a nitrogen industry capable of servicing its growing fertilizer needs. Only Trinidad is a world-scale producer, and it has faced challenges with gas. Profertil in Argentina has been a lone success story in terms of urea development, and belatedly the restart of the troubled YPFB plant in Bolivia. Venezuela struggles with sanctions and poor maintenance, and Brazil and Mexico still struggle to attract the foreign investment that could turn their nitrogen industries around. In the meantime, it seems likely that the continent will continue to be an increasingly major buyer on world markets.
