A urea plant in Peru: what is needed to produce this fertilizer in the country?

Let's start from a basic principle: urea is prepared with ammonia, which comes out of natural gas. The largest natural gas field in Peru is located in Camisea, under the tutelage of the consortium of the same name, which re- injects 400 million cubic feet (mcfd) every day because "there is nowhere to use them."

Recently, the crisis due to the war between Ukraine and Russia, the latter global supplier of synthetic fertilizers

-such as urea-, has caused prices to drop. This, not to mention the fact that the closure of the gas pipes to Europe has also made natural gas more expensive in the world.

Consequently, the Peruvian government has tried to tender, through Midagri, the international supply of this urea up to three times, but has failed twice and the third is yet to be seen in November. Now, a commission is proposed that in 15 days present a report for a local production plant.

But, what is really needed for our country to have a urea production plant? And furthermore, what guarantees that once built, the prices are affordable for the national market?

Camisea: renegotiation for gas and urea

According to Jorge Manco Zaconetti, a researcher at the UNMSM, the construction of a urea plant in Peru -and with it, the foundation of a true petrochemical industry in the country- involves, directly, renegotiating the Camisea gas contracts .

According to the hydrocarbon specialist, it is essential to sit down with the group led by Argentina's Pluspetrol to agree on a competitive gas price for this industry, regardless of whether the plant proposed by the Executive is private or public capital.

"In 2007, there was a tender for a nitrogenous fertilizer plant, and the company CF Industries won to process some 100 mcfd of natural gas from Lot 88, which Pluspetrol had to give up due to political pressure. But Pluspetrol put a price of US$5 to US$6 per million BTU (mBTU) and, as the crisis hit that year, Henry Hub gas prices went from US$10 to US$3 per mBTU", explains the professor.

The Henry Hub marker is the international price reference for the natural gas market, similar to WTI oil. Meanwhile, one million BTU (British thermal unit, British thermal unit for its translation into Spanish) is equivalent to approximately 1,000 cubic feet of gas.

"So, it was more profitable for the North Americans to build the plant in the United States. Having won the tender, he was no longer interested in the project because the price of the input was too high", he continues.

In this sense, Manco Zaconetti warns that, for a plant of this type to exist in our country, it is decisive that the price of natural gas for urea be "equivalent to the price of gas for electricity generation". At most, US$1.8 per mBTU. If not, it will still be cheaper to bring it in from outside.

It should be noted that manufacturing urea depends exclusively on having a true local petrochemical industry, so the task and decision rests on the shoulders of the Ministry of Energy and Mines (Minem), and not so much the Ministry of Agrarian Development and Irrigation ( Midagri), whose position is more declarative.

Urea: a fertilizer plant in the south

Jorge Manco also thinks that the construction of a urea plant should be developed in the south of the country, as close as possible to the Camisea deposits, in La Conveción, Cusco. An alternative could be the route followed by the TGP pipeline (which brings gas to Lima) over the area of Marcona, Ica.

In this sense, he explains that the model of the 1980s could not be replicated with a fertilizer plant in Talara - where the new Petroperú refinery is now ready for operations-, since it would require between 100 and 250 mcfd of gas, while the supervised production of Piura does not exceed 60 mcfd. He couldn't feed her.

"But the fundamental thing is to have a low price, if not, you make the investment to manufacture urea impossible. Electric companies are rewarded with cheap gas that they later sell to us at a high price, and on the other hand, if you want to do petrochemicals for urea and nitrates, they sell you more than double the gas. There you just make everything impossible ", he refers.

"It is a question of strategic renegotiation : I give you and you give me, because we cannot bet on nationalization or nationalization by force, and for that we also need a strong government that looks after the interests of the country, a real government, "concludes Manco.