Founder: Turnaround Talk
When the signs of the impending pe started to emerge, emergency measures such as reducing energy consumption and power rationing (loadshedding called by a different name), South Africans felt that it was time to invite Europe to join the same WhatsApp group we have been in since 2008.
But this is no laughing matter. The European energy crisis has far reaching implications and has to potential to impact many companies across some of the world’s biggest economies. Once again, this is a clear indication of how an external force can be the root cause of financial distress for even the most economically sound company.
While South Africa has been dealing with this for some time. We should be keeping a close eye on the development of this crisis and its fall out. A recent article by ewn.co.za points out that this crisis will cause significant long-term pain and could change the course of politics in Europe.
Some subheadings and the concluding paragraph were written by Turnaround Talk.
Permanent change
At a recent event in Qatar, Shell Chief Executive – Ben van Beurden – said European industry face taking a major hit from the energy crisis, worsened by the Russian invasion of Ukraine.
The article points out that Europe has reduced consumption quite effectively, quite significantly following the loss of 120 million tonnes of Russian gas a year, van Beurden said, but a lot of this reduction is achieved by switching off industry.
Europe has desperately searched for quick alternatives to Russian gas, but van Beurden said Europe would need large amounts of liquefied natural gas (LNG) for decades.
“A lot of people say, turn down the thermostat, or maybe don’t switch on the air conditioning,” he said.
“But there is also why don’t we switch off the fertiliser plant that we have or let us scale down on some petro chemicals production in general. And that rationalisation, if it goes on long enough, becomes permanent.”
Shell Chief Executive
Political Pressure
The article points out that Van Beurden said there have been some victory laps in Europe over the way it has reduced demand but added some of it is actually bad news for the long term, namely economic or industrial rationalisation.
The Shell chief, who will retire at the end of the year, said industrial cuts could spark some rejuvenation, but also brought risks.
“To do it at this scale, this abruptness, at a time of economic challenges in general, I think will bring quite a bit of pressure on European economies, and perhaps also a lot of pressures for the political system in Europe,” he said.
Investing in the future
Based on the fact that Europe will depend on LNG for decades, Shell has agreed to a deal for a 9.3% stake in Qatar Energy’s North Field South project, which will play a major role in the Gulf state’s effort to increase liquefied natural gas (LNG) production by 50% in the next five years. Shell is the second European company, after France’s TotalEnergies, to take a stake in North Field South.
Twenty-five percent of the project has been reserved for international energy giants.
Expansion across the North Field, the world’s biggest proven gas reserves, is intended to increase Qatar’s LNG production by 50% to about 127 million tonnes a year by 2027.
Shell and TotalEnergies took stakes earlier this year in the North Field East zone.
“Natural gas assumes greater importance in light of recent geopolitical turmoil,” said Qatar’s Energy Minister Saad Sherida al-Kaabi as he welcomed the Shell deal.
Photo By: Getty Images
The South African situation
Again, it is prudent to point out that none of this is news to South Africans.
We have had our fair share of political pressure that has been influenced by loadshedding. Political parties, as well as labour unions, have all applied pressure on President Cyril Ramaphosa regarding our own energy crisis. In response, Ramaphosa has come out and said that the Eskom situation is a complicated one and he has encouraged South Africans to exercise patience regarding the resolution of this matter.
Is this answer sufficient? Will South Africans be content with this answer given our fragile economy and the fact that empty promises have continuously been made to address this? There have been plenty of times when the political pressure seemingly gets too great for President Ramaphosa, yet he survives it.
Like Russia, South Africa should be a net exporter of energy not only to Africa, but to the rest of the world. Our hydrogen reserves are sufficient enough to resolve the energy crisis in South Africa and many other countries. It will also address our unemployment crisis.
As we have seen, there is significant global demand for stable electricity supply, especially if it addresses any environmental impact. If South Africa ramps up its hydrogen valley (with its production hubs in Johannesburg, Durban/Richards Bay and Limpopo), the valley would not only add $3.9 billion to $8.8 billion to South Africa’s GDP by 2050, it will create an estimated 14 000 to 30 000 direct and indirect jobs a year by 2050.
The problem is that we need to find an immediate solution to our energy crisis. If Europe is facing long-term pain from its energy crisis, what would South Africa face? We have already ramped down industrial activity in an effort to address our own energy crisis. So we should be able to give some guidance to Europe about what their future looks like. In terms of our own political change, one would have to unfortunately think that the situation would have to deteriorate (if that is possible) to get to the point where political reform is guaranteed.
