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18 March 2009

The water snakes are back onshore

Local newspapers today are making major headlines again with “the first commercial wave farm of the world”. But for the wrong reasons, the state TV website published an article yesterday with the following opener:

The three Pelamis machines of the wave farm in Aguçadoura, that was considered by the Portuguese Government as a “flagship” of the country's leadership in renewable energy, where taken out of the sea and have been onshore, at the Leixões shipyard, for 4 months.

The two Pelamis units deployed in September were at sea for only 2 months and there's no date set for a return to operation.

The article continues:

Talking to the news agency Lusa, Rui Barros, from the Companhia de Energia Oceânica (part of the Babcock & Brown group, the project owner) said a recurrent problem was detected with the bearings of the hidraulic jack's articulations in all of the three machines, prompting their move out of sea.


According to Rui Barros, the continuing problems with these bearings that are submerged, forced the transport of the three machines back to shore by mid November, “so that an inspection could take place”.

“We then verified that the problem was serious an extensive, a generalized problem and not fortuitous.” he explained.

Since then, Pelamis Wave Power, Babcock & Brown's technological partner e maker of these machines, “entailed a discussion” with the company that provided the bearings, being set for April the arrival at Portugal of new parts to repair the equipment.

“I'm awere that there's a team from Pelamis ready to come to Portugal to substitute the bearings”, said Rui Barros.

According to this official, replacing the bearings will take about a month, after which the machines can again be brought to high sea, resuming the testing they were being subject to.

“I'm convinced that, if no other problem brews up, before the end of Summer we shall have the three machines totally free for commercial production. But it is all, if, if, if...”, he said.

But other problems are menacing the project, the credit crisis is hitting Babcock & Brown hard, that was forced to sell assets to cover its debt, including the Pelamis project. Now it becomes known that the consortium announced in September between this company, tow local ones and another Australian investor was never signed. A second article gives further insight:

[…] the consortium announced six months ago between EDP, Efacec, Babcock & Brown and Pelamis for the development of the Aguçadoura wave farm and of a Portuguese 'cluster' in the field of wave energy never came to be.


“The initial assumptions of this project were altered and EDP is renegotiating them with Babcock & Brown”, said to Lusa an official from the Portuguese electric company. Underlining that it is still “committed to the project”, EDP didn't clarify if it is interested in buying the stake of the Australian fund.


On the Portuguese 'cluster' for wave energy, Rui Barros considered it “seriously compromised at the moment”.

The “race” for Portugal's leadership in this renewable energy field is already lost, for if the Aguçadoura wave farm was the first of its genre at the world level, “soon it will stop being so”, concluded Rui Barros.

There are several points worth making on this new development, but first it should be stressed that errors and faults are part of any engineering process. Such is the case for during the architecture phase details are missed and during the implementation phase things not always go as planned. In fact it is the process of testing, error discovery and correction that allows for the improvement of the final product. Knowledge improves when the product fails, not when it works as expected.

Nonetheless, a bearing leakage at this stage seems somewhat strange, especially considering that in situ tests were previously run in Scotland and in Portugal. Speculation can be made that either the bearing provider changed the manufacturing process or that the provider itself was changed in the meantime. In any event the commercial phase of the Aguçadoura project is now running almost 4 years behind the initial schedule.

On a larger scope the compromise of the wave power development 'cluster' is disheartening. And a proclaimed “flagship” project for the country being put at risk by the collapse of an investment fund managed at the other side of the world has its dose of irony. One gets the feeling it was all fireworks and that unfortunately Portugal might not have either the knowledge or the capital to be the “Denmark of wave power”. Being home to the technology and at the moment attracting the investment of E.On, Scotland seems to be righteous owner of that title.

Finally, the reserves I expressed earlier on the maturity of the technology seem to be vindicated by this new development. On the financial front, this new delay almost guarantees that the Aguçadoura project will be a money sink. As for EROEI, every error and fault corrected will improve the design and the assembly and deployment processes, thus also improving net energy. Still it seems now more than justified to at least postpone the 70 million € Aguçadoura II project, until this pilot project reaches an higher state of maturity.

Previously at EuropeanTribune: 

The First Wave Energy Farm of the World...It's About Time...

Previously at TheOilDrum: 

Tapping The Source: The Power Of The Oceans
Pelamis: A Shot in the Dark?

10 March 2009

Have Oil prices bottomed out?

This post is a translation to English of an article penned by Jorge Nascimento Rodrigues and published in the 28th of February in the Economy section of the journal Expresso, the largest weekly publication in Portugal. It is built on the insight kindly provided by TheOilDrum contributor ace.

Jorge Nascimento Rodrigues is a free-lance journalist and author, editor of JanelaWeb.com and GurusOnline.tv

Crude Oil
February closing with the barrel close to 45 dollars

Crude oil prices might be back to a mid term bull dynamics, says Australian analyst. February behaved on significant oscillations from one day to the other and the American variety [WTI] climbed 10%, going from 40,78 dollars to 44,76 per barrel.

The minima for the price of a barrel of crude oil, since the peak in July of 2008, might have happened before the Christmas of 2008, advances the analyst from TheOilDrum, Anthony Eriksen, a Canadian mathematician seeded in Sydney, Australia, where he specialized in energy and mining investments.

The conclusion that can be made is that the price of a barrel might be back to a mid term bull trend, after the fall from 145 dollars to less than 50 in the span of only six months last year.

Eriksen reminds that prices of the American crude (WTI) and of the European (Brent) touched then the minima of 31,41 dollars per barrel in 22/12/2008 and 34,04 dollars on Christmas Eve, respectively. This year, the lowest prices occurred last week, on the 18th of February, with values of 34,62 for the WTI and 39,10 for Brent.

The International Energy Agency (IEA) points to a variation interval between 40-45 dollars per barrel, which would still be below the wishes of many producing countries that point to a minimum of 50 dollars for many of the projects they have in scope to be viable, both economically as technologically, underlines the analyst.

The price of a barrel of the American WTI variety reached on the 26th of February a figure slightly above 45 dollars and closed at 44,76 dollars. The Brent vareity closed the month with a price (44,72 dollars) practically identical to the opening figure (44,46).

Daily Brent Blend prices since last September. Source: UpstreamOnline.com; image not in original article.

Wild Oscillations

Notwithstanding, the fundamental behaviour of prices during this year has been what some analysts ironically dub “wild oscillations”.

The months of January and February have been fertile with that kind of very close extreme variations; at least 11 cases were observed for the WTI variety solely in February: on 10/2 declined 5% and climbed 10% on 13/2; on 17/2 declined 7% and climbed 14% on 19/2; on 23/2 declined 3,6% and climbed 4,2% on 24/2, 6,6% on 25/02 and 8,5% on 26/2, to go down again on the last trading day of the month. This reveals the high volatility of the agents' behaviour in this market.

To where can these extreme oscillations go and in what measure can the barrel price climb again above 50 dollars or fall below 30 dollars, derives, according to Eriksen, from the “fight” between two heavy weights.

On the one hand the impact of the crisis on the demand of this commodity, continuing to reduce it below 85 million barrels daily (mbd) – the last estimate by the IEA points to 84,8 mbd. This daily figure was still inferior to supply in January of 2009, that was around 85,2 mbd, resulting in a difference of 400 thousand barrels daily.

On the other hand there are several political and physical factors that can influence supply, producing scarcity in the market. Something that didn't happen yet, in spite of the cuts programmed by OPEC, that “should already be enforced in 89% relatively to the commulative cuts announced since September that mount to 4,2 mbd, according to Bloomberg”, says Eriksen.

Black Swans

The analyst underlines that, in the political plane, sudden geoplitics changes in productive regions (namely in the Middle East that continues to be potentially flammable with issues like Israel/Palestine and Iran) or a collapse of the dollar due to the dragging financial crisis or to the political behaviour of the main American currency supporters, can make the crude oil price shot up without previous warning. It would be the surging of inesperate “black swans” to the international scene.

Physical constraints can also have a negative influence on supply. Eriksen refers that the group of oil producing countries outside OPEC seem to have already reached, together, a production peak.

In spite of good perspectives in cases like Brasil (that, nonetheless, can reach “a production plateau around 2011”, according to the studies of this analyst) and Canada for a few more years, global supply from this group is diminishing, with high decline rates in extreme cases like the Gulf of Mexico (around 20%). In 2009 production should decline in Russia, Mexico, Norway and the United Kingdom.

Concerning OPEC a continuation of the programmed cuts policy is to be expected, with a renewal already in the 15th of March, when the cartel meets again. A pressure group formed by Algeria, Iran, Iraq and Venezuela is playing to that tune, according to quotes issued during the last week and a half.

ace adds this final comment:

There remains great uncertainty about key OPEC producer Saudi Arabia's true oil reserves as they are kept as a national secret. The last time that Saudi had a production peak was in 2005 at 9.6 mbd.  There is a risk that Saudi Arabia's true crude oil reserves could be much smaller than official estimates implying that future production will stay below the 2005 peak.