Pemex’ foray into the fertilizer industry — intended to reactivate domestic production — has been a resounding multi-billion-peso failure, the Federal Auditor’s Office (ASF) has found.
The state oil company decided in 2014 to venture into the fertilizer industry by acquiring two privately-owned firms.
After an investment of 11 billion pesos (close to US $850 million), the parastatal soon found that all it had to show for its money was little more than rusted scrap metal, and that the market it intended to reactivate was already saturated.
In December 2014 President Enrique Peña Nieto announced that his administration’s fertilizer strategy would produce enough to replace 70% of the country’s imports.
Pemex Fertilizers, a subsidiary of the oil company, reported losses of more than 334 million pesos (close to US $18 million) between January and September last year, up from 26 million pesos two years before.
According to official data, in the two years after Pemex set about to reactivate the industry, the national production of nitrogen fertilizers dropped 4%, while that of phosphate fertilizers dropped 9%.
Pemex and the Peña Nieto administration planned to produce one million tonnes of nitrogen fertilizer by the end of last year, but by October the figure was barely half that, at 529,000 tonnes.
At the time of the purchases, critics pointed out that fertilizer production was already saturated.
One of the factories that Pemex purchased, Agro Nitrogenados, had been in Pemex’ hands before, in the 1990s. After it was sold off, the factory was all but abandoned.
Investigations by the federal auditor have also found that when Pemex bought the plant, located in the Pajaritos petrochemical complex in Coatzacoalcos, Veracruz, it was little more than scrap metal.
The probe also found that Pemex had overpaid by $93 million and that it had been warned about the plant’s bad shape.
Despite reports that the plant had been abandoned for 14 years, Pemex dismissed them and carried on.
Remodeling the factory was 142% over budget, said the ASF.
It now appears that Pemex is trying to unload its fertilizer investment. According to a report last month by Bloomberg, the oil company has been exploring options for selling Pemex Fertilizers.