Oil pioneer is cooking on gas with latest venture
The investment column that makes the most of your money
TO THOSE of a certain age, Algy Cluff is a name to conjure with. Cluff was one of the pioneers of North Sea oil, making some of the first discoveries and so helping kick-start the boom there.
He later moved into gold exploration, but in recent years he has been back in the North Sea, drilling for coal, oil and gas. Obviously his past success does not guarantee the future, but for those prepared to take risks, his latest venture, Cluff
Natural Resources, is worth a look. Make no mistake, this is at the moment a tiny company, with a market value of just £7.5million, and it made a loss of £745,000 in the six months to June. The potential value hinges on the firm’s ability to turn its two areas of activity into profitable oil and gas operations.
The conventional side of CNR owns five drilling licences for the North Sea, where new technologies – notably fracking – mean longknown gas reserves may at last be suitable for extraction. Fracking for gas onshore is controversial, but offshore is far less so and is already practised in the North Sea.
CNR has a close relationship with Halliburton, which has expertise in this technology, and a formal deal soon between the two on exploiting the reserves is a real possibility.
The unconventional side is riskier, but offers even greater returns and hinges on underground coal gasification (UCG). Turning coal into gas is distinctly old-tech, producing coal gas. But UCG enables that process to take place without having to dig up the coal. High temperatures are created in the coal seam, creating the gas, which can be pumped out for refining into other products. The technology means North Sea deposits can be used to create the gas far more cheaply than before.
CNR owns key licences in several fields in the Firth of Forth and it believes they are suitable for UCG. The gas could be pumped directly to the nearby Grangemouth refinery.
The main obstacle is planning. In theory UCG can be operated entirely from onshore sites because modern drilling techniques enable pipes to be drilled horizontally into offshore reserves. Cluff admits local resistance to such development is a hurdle, though he also argues that, if necessary, drilling could be done offshore and still be economically viable. CNR hopes the Government will intervene to encourage alternative gas extraction such as UCG from onshore sites.
Midas verdict: There are many hurdles to Cluff’s unconventional gas extraction plans. What matters most is whether there is a political will to make this happen and clear the planning obstacles. Energy demands will probably prevail. The conventional gas opportunities pro- vide a balance to the innovative side of the business. Be aware, this is a risky business and even if it does come good for CNR, real profits are some way off. But the demand for domestic energy is real enough now and the technology is well-established.
Since floating in 2013, CNR shares have been as high as 6¼p and as low as 3p and prices can move in alarming jolts with small, illiquid stocks. At their current 3.625p they are a buy, but only for those prepared to take a marked risk. CNR could fall foul of planning or the vicissitudes of global markets. But this could be a chance to get in on the ground floor of a gas exploration success.