Portuguese construction firm Mota-Engil SGPS, SA said it has signed an agreement with Mexican state oil company Petróleos Mexicanos (Pemex) to build a $1.2 billion fertilizer plant at Pemex’s Escolin complex in Poza Rica, Veracruz state.
The agreement marks the latest effort under President Andrés Manuel López Obrador to revitalize fertilizer production by downstream unit Pemex Transformación Industrial.
Under the deal, Mota-Engil’s Mexico subsidiary would be responsible for engineering, construction, financing and operation of the plant, which would have capacity to produce 700,000 tons annually of ammonia, urea and AdBlue – a diesel exhaust fluid used to reduce harmful pollution from engines.
The contract would use a tolling model under which Pemex would deliver the main raw materials, i.e. natural gas and water, to the plant. The companies did not specify whether the gas would be produced locally or imported.
Mota-Engil, in turn, would be responsible for transformation and delivery of the final product, “without price change risk of the raw materials and/or any responsibility in the sale of the final product,” according to the company.
Plans are to develop the project in three phases, starting with the development of engineering feasibility studies over a period of four to six months.
“The second phase, construction, is expected to [last] 42 months and will have an investment of $1.2 billion and will be followed by the technical operation of the plant for 20 years,” Mota-Engil management said. “Under the agreement, the remuneration will be based on availability payments during the 20-year operation period of the plant, and the investment remuneration will correspond to a fixed tariff, annually updated at the inflation rate, while the operation remuneration component is linked to performance.”
Spain-based engineering and construction firm Duro Felguera also would participate in the project.
Mota-Engil Mexico would be “responsible for the global coordination of the project and will integrate the associated company, Duro Felguera, which will bring its extensive experience and specialized know-how in the industrial and energy construction sectors,” Mota-Engil said. The firm added that “future partnerships are expected to arise within the context of the new cycle of energy transition and in industrial projects related to…nearshoring, for which Mota-Engil Mexico wants to be a relevant player by reinforcing Mexico’s competitive capacity in the region.”
Pemex CEO Octavio Romero said in January that the 100% state-owned firm is aiming to double fertilizer production to 1.69 billion tons in 2024 from 835 million tons in 2023.
Pemex set a 2024 fertilizers capital expenditures budget of $2.65 billion, up from $790 million in 2023 and $75 million in 2022, according to the firm’s latest 20-F annual report filed to the U.S. Securities and Exchange Commission.
“The construction of this plant will allow the decrease of imports of fertilizers and will significantly strengthen the production autonomy of the country’s agriculture sector, besides promoting sustainable environmental solutions, through the reduction of polluting gas emissions to the atmosphere, which the incorporation of AdBlue in fuels [promotes],” added Mota-Engil.
Following the Mota-Engil news, Adrian Duhalt, a nonresident scholar at Rice University’s Center for the U.S. and Mexico, said Mexico’s urea and ammonia production appear “set to grow significantly” under President-elect Claudia Sheinbaum’s administration.
“I think it is a step in the right direction,” Duhalt told NGI’s Mexico GPI. “For years, if not decades, development of the ammonia–urea chain has been put on the back burner by Mexico’s policy makers, and that is starting to change. The same argument applies to other chains of the petrochemical industry.”
He added, “To achieve its fertilizers goals, Mexico's government faces the challenge of ensuring reliable natural gas supply and maintaining a consistent operation of the ammonia and urea plants that Pemex owns at its Cosoleacaque and ProAgroindustria complexes in Veracruz.”
He suggested that this natural gas supply would come via imports from the United States.
Natural gas demand from industrial consumers in Mexico has averaged 2.4 Bcf/d year-to-date through July 17, down 79 MMcf/d versus the same period last year, Wood Mackenzie data show. Pemex as a whole has consumed 1.54 Bcf/d over the same span, equal to 18% of Mexico’s total gas demand.
