Baker Hughes isn't seeing any letup in investments for major energy projects, even as borrowing costs climb. CEO Lorenzo Simonelli pointed out that demand for natural gas and energy is strong, fueled by the worldwide growth of artificial intelligence infrastructure.
At the Gastech conference in Bangkok, Simonelli explained that these projects are largely backed by existing offtake agreements and a positive outlook for energy demand. Financing is still critical, he noted, but the growing energy needs from population growth, industry, and data centers continue to push investments forward.
Simonelli remarked that energy demand is not necessarily going to slow down with the increasing population and the increasing linkage between industrial outcomes of data centers and AI, which is intrinsically linked with energy supply and energy sources. He added that Baker Hughes is keeping a close watch on the situation but hasn't noticed any major impact yet.
Simonelli's comments come amid the ongoing conflict in Iran, which has disrupted energy flows in the Middle East and driven oil prices above $100 a barrel. This has intensified worries about inflation and borrowing costs. Natural gas markets are also facing hurdles because of shipping restrictions through the Strait of Hormuz, affecting LNG supplies from Qatar, a leading exporter.
Despite these challenges, Simonelli is confident that high prices can spur the needed investments to boost supply. He stated that it's 'full steam ahead' with the aspect of looking beyond the short term, and high pricing also leads to investment today, which will lead to supply coming in tomorrow.
Baker Hughes predicts that LNG capacity will need to hit 900 million tons per year by 2035 to meet future demand. The company isn't worried about a potential oversupply, expecting prices to remain stable.
Artificial intelligence is becoming increasingly important in this environment. Simonelli noted that Baker Hughes doesn't expect a slowdown in the rapid expansion of data centers, despite rising concerns about their energy and water use. He said, "We think there won't be a slowdown, " and confirmed that Baker Hughes is ramping up its capacity to meet this demand.
In Southeast Asia, grid limitations are leading some data-center operators to explore behind-the-meter and distributed power generation, areas where Baker Hughes supplies equipment. Simonelli sees natural gas as essential in meeting the rising electricity demand.
Baker Hughes currently has a backlog of over $37 billion, including demand related to gas infrastructure, data-center power generation, and LNG. Simonelli concluded that natural gas is not a transition fuel; it's a destination fuel, and we're in an energy demand decade, with gas being central to it.
