Offshore oil and gas industry veteran Algy Cluff talks exclusively to Offshore Post on the UK’s energy security, and sets out what needs to be done to ensure the future survival of the North Sea oil and gas industry.
The offshore energy industry has had to endure years of neglect from various Chancellors of the Exchequer and ‘deranged’ energy policies proclaims Mr Cuff, not to mention the ever changing policies at the 23rd hour by the Scottish government.
However, the future is bright for both exploration and production of North Sea oil and gas he declares, it just needs everyone to get together.
Algy Cluff first started in the oil & gas industry in 1972 when he formed Cluff Oil. His first company not only went on to win a number of North Sea exploration licences in the UK’s 4th licensing round, but discovered the Buchan oil field only two years later.
Having had a front row seat for more that 40 years, Mr Cluff has watched the UK sector emerge from nothing, develop into it’s early entrepreneurial stage of rapid discovery, and mature into an industry dominated by the world’s oil majors.
With those oil companies now pulling out to look for areas of new growth, Mr Cluff is now uniquely placed to see a growing opportunity for a new serge of offshore exploration, bucking the trend of dwindling reserves, and heralding the start of North Sea Mk2.
Algy Cluff is currently Executive Chairman and Chief Executive Officer of Cluff Natural Resources, an London based oil and gas exploration independent. .
Declan Cluff – Hello, this is Offshore Post, I’m Declan Curry.
Algy Cluff was exploring for oil in the North Sea in the 70s. After a 40 year gap he’s back. Algy what’s changed?
Algy Cluff– Well those were heady days in those early days of the North Sea, when virtually every well was a discovery. It wasn’t difficult; and of course our first hole [the Buchan oil field] was crowned a success- it doesn’t happen now.
After a fairly depressing period for all of us in the North Sea – manifested by the lack of interest exhibited by the Chancellor of the Exchequer in assisting the North Sea in any shape or form – we are hopeful that the new team at the Treasury and the new department will regard the North Sea with the respect that is due to it.
Declan Cluff – So you’re hoping you might get a better treatment from the new ministers? Have you been talking to them? Have you had meetings with them?
Algy Cluff – You could hardly be less enthusiastic than George Osborne was. I think that it is important from a security point obviously, which is clearly very much in the Prime Minister’s mind.
Declan Cluff – And that’s your pitch to them, one of energy security; that it’s better for Britain to use British Gas than to import gas from overseas?
Algy Cluff – Precisely. We’re in a very vulnerable position. It’s difficult to conceive how we actually got to the position we’re in to be frank. And a measure of the deranged almost, nature of our energy policy – particularly as it was constructed by the coalition government – is manifested in the intended construction of the biggest offshore wind farm in the world on the Dogger Bank. Happily it hasn’t started yet and hopefully it never will.
It will not involve a single British company, will sanitise some outstanding gas geology which the private sector would drill, and which would involve the subsidy from £5-£6 billion before it makes a profit, if it ever does make a profit.
Declan Cluff – You sound pretty miffed about how the politicians are treating you whether that’s Mrs Sturgeon in Scotland or George Osborne when he was chancellor for the UK.
Algy Cluff – George Osborne was deaf to all the entreaties from the expiration Industry. He tinkered around with the tax arrangements for the major companies, when all that serve to achieve was to render it easier for them to sell out of the North Sea, which they did in many cases; and to private equity companies not oil companies who have no interest whatsoever in exploring. I thought he just wasn’t interested because the tax take dropped and he just wasn’t interested in listening to any representations which we made. In the Scottish context of the UCG [underground coal gasification], yes we were treated extremely badly. I’ve been Africa, much derided Africa for 40 years; we never received any treatment from any African government that compares to the treatment that we received from the Scottish government- a straight double-cross.
Declan Cluff – What about Hinkley point, is the Prime Minister right to delay the decision on that?
Algy Cluff – No I think she was absolutely right to introduce some common sense into that situation too. I think she has it very much in mind to devise a proper coherent energy mix, and that will involve to a great extent the new look at the North Sea and a new method of encouraging exploration in the North Sea notwithstanding.
Declan Cluff – Another part of your business is making synthetic gas from coal deposits, underground coal gasification.
Algy Cluff – I think gasifying our offshore coal 1000 meters below the seabed should be a part of that mix. We have a huge amount of energy there and in our view it can be safely and cleanly converted into gas, and at the very least, we should – with the government perhaps – install a demonstrator to see how efficiently that process does work. And the north-east of England would be the perfect place to apply that. And hopefully to revive the CCS [carbon capture scheme] plans which George Osborne cancelled.
Declan Cluff – So what has to be done to make sure we get the best out of the North Sea?
Algy Cluff – If the government is complementary to the exploration industry it could be in North Sea Mk2.
Declan Cluff – But what do they they need to do for that to happen?
Algy Cluff – They’ve got to be benign in terms of work commitments, relaxation of work commitments, extension of work commitments; and hopefully they will apply themselves to understanding the so-called Norwegian model or something similar to that, were there is a rebate provided on the costs of exploration holes. That’s made a huge difference to the level of exploration and discovery of course in the Norwegian sector.
Declan Cluff – The oil majors – the big oil companies – are pulling out of the North Sea. Does that create opportunity for companies like yours?
Algy Cluff – If we were encouraged to conduct more aggressive exploration – and we were successful – there’s no doubt that the oil majors would come back in again, and develop those [oil and gas] fields for us.
Declan Cluff – So how long do you see the North Sea being viable- being economic?
Algy Cluff – Well if the price of oil – the price of gas is quite robust in the Southern North Sea incidentally – but if the price of oil doesn’t drop significantly below $50 a barrel for a sustained period, then I think the future is bright.
Declan Cluff – Challenging but bright?
Algy Cluff – Yes. But we have all got to get together. It’s got to be a communion of the politicians, the civil servants, the financiers and the oil companies.
Declan Cluff – Algy Cluff, it’s been great listening to you thank you for talking to Offshore Post.