Oct 08, 2010
High Natural Gas Prices Could Impact Fertilizer Production
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The goal of the Brazilian government to be self sufficient in fertilizer production within a decade has hit a setback due to the high price of natural gas flowing into Brazil from Bolivia. The developers of several new nitrogen fertilizer plants that would use the Bolivian gas to produce nitrogen fertilizers, have indicate that the current prices for natural gas have them reconsidering other options.
On a daily basis, 30 million cubic meters of natural gas flows into Brazil from Bolivia, but the recent nationalization of the gas industry by the Bolivian government has resulted in a significant increase in natural gas prices. The Brazilian government and Petrobras have protested that these price increases violate existing long term contracts. The two sides have been negotiating a settlement, but no resolution has been reached. The problem for the developers of the nitrogen fertilizer plants is that their economic forecast were based on lower price natural gas from Bolivia.
There are two proposed nitrogen fertilizer plants proposed for the state of Mato Grosso do Sul. Petrobras is in the process of constructing a nitrogen fertilizer plant in the city of Tres Lagoas on the border of Sato Grosso do Sul and Sao Paulo. A Russian company called Metaprocess is proposing a second nitrogen fertilizer plant to be built in the city of Corumba located on the border of Mato Grosso do Sul and Bolivia. Petrobras has already allocated R$ 2 billion for the construction of the plant. The Russian business is still conducting economic studies concerning the viability of the plant.
Each of these plants would consume approximately 2 million cubic meters of natural gas per day or about 13% of the total natural gas flowing into Brazil.
In recent years, Brazil has become more dependent on imported fertilizer supplies. During the first eight months of 2010, Brazil imported 8.87 million tons of fertilizers compared to 6.62 million imported during the same period in 2008. The total Brazilian consumption of fertilizers during the first 8 months of 2010 was 13.58 million tons. In other words, 65% of the fertilizers consumed thus far in Brazil during 2010 were imported.