Brazil's Latest Energy Auction Brings In New Gas Projects - WSJ.com

OCTOBER 15, 2009, 3:27 P.M. ET

SAO PAULO (Dow Jones)--Brazil's latest energy auction, scheduled for Dec. 17, has an ambitious total of 81 new energy projects on paper with more than half being for costlier natural gas rather than hydro power.

The auction is for around 19,168 megawatts of electricity to be sold to the grid starting in 2014, the Energy Research Company, EPE, said Thursday.

An EPE spokesman said that not all of the projects will see the light of day, especially the new 19 hydroelectric dams. None have received early study environmental permits.

Forty-nine of the 81 projects are for natural gas, for a total of 15,015 megawatts, compared with the 19 hydro projects electric generating capacity of 1,106 megawatts.

Brazil's electricity is mostly derived from hydroelectric power stations. Around 85% of the country is powered from massive dams like Itaipu in the south, which generates around 14,000 megawatts of power annually.

The problem with cheap hydroelectric power is that it depends on river water levels. When those levels are low, the power generated from the dam shrinks significantly and can even lead to dams being temporarily shut down.

Natural gas discoveries in the offshore Santos Basin and new liquified natural gas import terminals are making the costlier natural gas a popular back-up to hydro power that is susceptible to dry seasons, said EPE director Mauricio Tomalsquim.



-By Kenneth Rapoza, Dow Jones Newswires; 5511-2847-4541; kenneth.rapoza@dowjones.com"