Why Africa should keep drilling for oil with Algy Cluff, Founder of Cluff Energy Africa
Algy Cluff, Founder, Cluff Energy Africa
Algy Cluff has been in the extractives game for a long time, founding Cluff Oil in 1972. Now, 40 years after he first entered the African market, the landscape looks very different as he launches his new venture, Cluff Energy Africa. Established in 2019, the company has already provisionally been awarded license covering 16,000km2 in Sierra Leone with plans to expand across East and West Africa.
As the larger oil and gas players pull out of exploration, Cluff sees “an enormous opportunity to fill the gap”. The shift has certainly been dramatic with 11 leading national oil companies slashing exploration spending by 26% last year. For Algy Cluff this will only lead to one thing: upwards pressure on oil prices. Despite the volatility accompanying Covid-19, he remains confident that the rebound will see oil prices settle at a high watermark and, with the giants of the industry pulling out, a space has been left for smaller and nimbler companies to move in. “We’re definitely seeing a fragmentation of the oil and gas market,” he explains. As well as smaller players, Russia and China are also looking to consolidate their position in the African commodities market.
Acknowledging that these shifts are part of an inevitable transition, Cluff admits that alternative energy sources “will be the answer” for the global energy production to meet the Paris Climate Accord targets. Nonetheless “smaller countries need to survive in the interim,” he highlights, especially as national budgets to develop alternative energy on a large scale are limited. For a continent with an electrification rate of only 43% compared to a global average of 87%, the challenge of the energy transition comes as countries grapple with how to deliver energy on a scale to drive growth and development.
Creating mutually beneficial growth means extractive companies must engage closely with local communities and governments. This approach has formed an essential part of Cluff’s strategy since he first offered employees of his mine in Zimbabwe the opportunity to own shares in the company, which was listed on the Harare Stock Exchange in the 1980s. “It’s a mystery to me why African stock markets haven’t evolved more,” he admits. As much as their financial application, he says, listing on local stock exchanges allows companies to “bring the local community inside the tent”.
Cluff Energy Africa intends to apply this same philosophy if any of its explorations lead to successful commercial discovery. Although oil and gas does not employ the same number of people as mining, it can raise revenues for host governments. Cluff intends to offer a 10% stake in any successful oil production to the host government, suggesting the establishment of national oil corporations to drive local investment.
The oil and gas industry stands at a challenging crossroads as the global community begins to establish what a net-zero future might look like. While this new world is being built, however, Cluff insists that oil still has its role to play and urges investors to seriously consider its growth potential. “Africa is still a thoroughly underexplored continent with opportunities,” he concludes, “with governments that have a good understanding of the nature of the business and with a good 40 years before the new world which everyone is looking forward to becomes a real force.”
Any enquiries should be directed to matt@cluffminerals.com.
