Vale’s Natural Gas Asset Sale Draws Interest From Cemig

Cia. Energetica de Minas Gerais, Brazil’s second-biggest electricity producer, wants to buy natural-gas reservoirs from Vale SA (VALE3) to have more fuel for power generation.

Cemig, as the Belo Horizonte, Brazil-based utility is known, needs sources of gas other than the state-run oil producer Petroleo Brasileiro SA (PETR4), which provides Cemig with almost all of the fuel it currently uses, Chief Financial Officer Luiz Rolla said in an interview at the Rio Investors Day conference today.

“If those assets are good and attractive and provide what we need for development, yes it’s a possibility,” Rolla said. “We are looking for additional supplies other than Petrobras.”

Vale, the world’s largest iron-ore producer, is looking to sell stakes in oil and gas exploration fields to focus on increasing returns to shareholders after declining prices for minerals and metals reduced profit margins. Vale has minority stakes in onshore and offshore gas projects in Brazil.

Cemig rose 0.8 percent to 34.80 reais in Sao Paulo.

‘Best Potential’

“We view natural gas as the best potential for growth over the next five years, we need to enlarge our scale,” Rolla said. “The natural gas business is complementary to the power business.”

Cemig aims to become Brazil’s second-biggest energy company, behind Petrobras, by 2018 as it pursues acquisitions to expand electricity generation and distribution, Rolla said.

Vale entered the hydrocarbons exploration business in 2007 as part of a strategy to supply gas to its mining operations, and has minority stakes in oil and gas blocks.

Vale hired Bank of Nova Scotia (BNS) and Citigroup Inc. to sell its oil and natural gas assets, according to three people familiar with the matter. An official at Vale’s press office, who can’t be named because of company policy, declined to comment on Cemig’s potential purchase.

Vale said in 2010 that it certified oil and natural gas resources equivalent to 210 million barrels of oil, with potential to produce 58,000 barrels a day in 2017. The company said then it had 23 offshore blocks in 14 concessions in Brazil’s Santos, Espirito Santo and Para-Maranhao basins and two onshore concessions in the Parnaiba basin.

Petrobras, Royal Dutch Shell Plc (RDSA) and Repsol YPF SA are among Vale’s partners in the concessions, according to data from the Brazilian oil regulator known as ANP.

To contact the reporters on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net; Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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