Brazilian state-controlled oil company Petrobras has rescinded the construction contract for its R3.21bn ($1.19bn) nitrogen fertilizer plant in Tres Lagoas in Mato Grosso do Sul state, the latest repercussion of a deepening corruption scandal centered on the firm.
The construction consortium, known as UFN3, is made up of Brazilian construction company Galvao Engenharia and China's state-owned Sinopec subsidiary Sinopec Petroleum do Brasil.
The plant had been scheduled to begin operating in June 2015 and to produce 1.2mn tonnes/yr of urea and 761,200 t/yr of ammonia, using natural gas imported from Bolivia.
Last week, several top executives from the Galvao group were charged by federal prosecutors in a widespread kickback scheme which allegedly involved Petrobras' downstream contracts.
Petrobras is currently the target of an investigation by the US securities regulator SEC.
The UFN3 consortium was not available to comment on the status of its contract.
The municipal government of Tres Lagoas said UFN3 has not paid 3,500 workers at the project. A local labor court has seized R80mn in assets of UFN3 to guarantee the payment of workers, many of which have been laid off.
UFN3 has said it dismissed most of its workforce, claiming that Petrobras had not paid the consortium for services rendered, which Petrobras denied.
Petrobras said the contract is behind schedule and is "seeking solutions together with the UFN3 consortium to continue construction." Petrobras also said that 2,500 workers continue to work on the site, although industry executives say the number is closer to 800.
Work on the plant is 82pc finished, according to Petrobras. UFN3 has until 18 December to respond to Petrobras' decision to suspend its contract. The consortium said last week it plans to resume work on the plant in January 2015.
The delay in the plant will prolong Brazil's growing dependence on imported fertilizers. During the first 10 months of 2014, Brazilian imports of nitrogen-based fertilizers increased by 11pc, according to the Brazilian fertilizer association (Anda).
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