| June 5
June 5 Cemig , a Brazilian
power utility controlled by Minas Gerais state, believes natural
gas from local shale deposits can fuel further growth of one of
the country's industrial hotspots.
Dorothea Werneck, who chairs Cemig's board and holds a top
position in the Minas Gerais government, said initial results
were "very, very promising" from shale exploration there, in
blocks held by companies including Royal Dutch Shell Plc
Cemig Chief Financial Officer Luiz Rolla said shale gas
could be a "turning point for the Minas Gerais economy" if its
cost was as low as they expect, since it would drive expansion
by companies seeking more affordable power.
"Along with the production of energy, we could have other
industries using the gas in their industrial processes," Rolla
said in an interview.
Cemig clients include steel maker ArcelorMittal
and aluminum smelters, and Werneck saw potential for fertilizer
and chemical plant developments if enough gas was available.
Minas Gerais, which translates to "General Mines" in
English, has 19.6 million people and covers an area bigger than
California, but smaller than Texas. It is Brazil's third-largest
economy, out of 27 states, after Sao Paulo and Rio de Janeiro.
Other industrial companies with operations there include
Anglo American, Fiat, Vale and
Usiminas. Its mines produce about a fifth of the
world's seaborne iron-ore exports.
Werneck said there was enough demand to increase Cemig's
current natural gas deliveries by 10 times, if only there was
"We are now importing gas from Bolivia, which has
established a minimum price that is too high," she said ahead of
a meeting with investors in San Francisco, California.
Cemig, which owns 60 percent of gas distribution company
Gasmig while Petrobras holds the rest, also believes residential
consumption of natural gas could grow, and it is now building
out infrastructure for 60,000 households.
Apart from selling it directly, Cemig also expects natural
gas-fired power will represent the bulk of its growth given the
lack of potential hydropower expansion in the Amazon rainforest.
"Currently, the reservoirs are enough to supply the market
for the next two years," Rolla said. "Some years ago, they were
enough for five years."
China is a growing competitor for Cemig and others, with
State Grid Corp of China agreeing just last week to
buy Brazilian electricity transmission assets from Spanish
A Chinese company also ended up winning an auction for a
stake in Portuguese utility EDP, which Cemig had been
looking to buy.
"Apparently the returns they required for their investments
are pretty low," Rolla said. "That is a big red signal for us."
Nonetheless, Cemig would continue to try to engage the
Chinese as partners. "The best way to beat a competitor is to be
a partner," Werneck said with a laugh.