By Marta Nogueira and Fábio Teixeira
RIO DE JANEIRO (Reuters) – Brazilian chemical company Unigel is demanding compensation from state-owned Petrobras for losses at two leased fertilizer plants, a legal letter seen by Reuters showed, marking another setback in negotiations to reopen the plants.
The two factories, a key part of President Luiz Inácio Lula da Silva’s plan to alleviate Brazil’s dependence on imported fertilizers, have halted operations since the second half of last year.
In December, the two companies signed a “toll” contract in which Petrobras would supply natural gas in exchange for fertilizers, allowing Unigel to restart production without worrying about fuel prices. The deal collapsed in June without coming into force after Brazil’s Federal Audit Court (TCU) said it could cause a loss of 487 million reais ($87 million) for Petrobras.
In the previously undisclosed letter from Unigel’s lawyers dated June 20, the chemical company complained that the deal had made its financial situation even more critical.
“The delay in implementing the Toll Contract is resulting in significant losses” for Unigel, lawyers told Petrobras a week before the state-owned company ended the agreement.
The lawyers added that Unigel must be “fully reimbursed” by Petrobras for losses since the toll agreement was signed.
In a statement, Unigel said that total losses reach “hundreds of millions” of reais.
Petrobras did not respond to questions about the demands in Unigel’s letter. Both companies continue to work on a solution to resume production, they told Reuters in separate statements.
However, the letter shows that as of last month the companies – currently in arbitration – were far from an agreement and relations were strained, with Unigel calling Petrobras’ actions “abusive”.
Increasing fertilizer production is a priority for the Lula government. Since taking office in 2023, Petrobras has reversed the course of disinvestment in fertilizers, announcing in June that it would resume operations at one of its factories.
As an agricultural power, Brazil is among the world’s largest consumers of fertilizers, of which it imports more than 80%. According to a plan revealed in 2022, Brazil plans to reduce fertilizer imports to 45% by 2050.
Even so, the two factories in Sergipe and Bahia that Unigel has leased from Petrobras since 2019 remained idle this year. When in operation, the plants made Unigel the largest Brazilian producer of nitrogen fertilizers.
Unigel is spending about 13 million reais ($2.4 million) a month on the plants, lawyers said, worsening the company’s financial situation as it seeks to restructure 4.1 billion reais in debt to bondholders.
Until March, when it fired plant employees, Unigel was spending 35 million reais a month, its lawyers said, adding that the company kept them employed at the request of Petrobras.
Even so, the company does not want to give up the assets, it told Reuters in a statement, as it intends to resume operations when they become economically viable.
Without an agreement, Petrobras and Unigel have been in a confidential arbitration process since December over clauses in their gas supply contract.
Arbitration processes often take around two years to conclude, but some can last up to five years, said Marcelo Godke, a corporate law specialist at Godke Advogados.
($1 = 5.5864 reais)
(Reporting by Marta Nogueira and Fabio Teixeira in Rio de Janeiro; editing by Brad Haynes and Marguerita Choy)
