Baker Hughes Detects LNG Slowdown Solutions, Global Opportunities

While Baker Hughes is closely monitoring the U.S.’ pause on LNG permitting, the company sees plenty of opportunity internationally to win LNG contracts in 2024 and beyond.

During the company’s earnings call discussing fourth quarter and full year 2023 results, CEO Lorenzo Simonelli addressed the uncertainties of LNG permitting in the U.S.—especially now that President Biden has turned speculation about a halt in LNG permitting into reality.

“I'm disappointed that this is coming about right now. U.S. LNG is enormously beneficial to the U.S. economy,” Simonelli said during the conference call. “It’s had a large impact, a beneficial impact on global energy markets, especially when you look at everything that’s happened.”

U.S. companies have already committed to providing LNG supply to other countries, he noted. “It’s a matter of national security for many.”

Baker Hughes doesn’t expect detrimental impact to U.S. LNG over the long term.

“Outside of U.S. LNG though, international projects continue to be buoyant,” Simonelli said citing opportunities in the Middle East, Africa and Southeast Asia. “We’ve got an extensive reach on the international projects as well.”

Baker Hughes offering “a total gamut” of LNG solutions combined with global reach means a U.S. LNG permitting slowdown should not affect the company this year, he said.

The business is “continuing to monitor the situation in the U.S., but anticipates that will solve itself over the long term,” Simonelli said.

LNG FIDs

Gas technology products and services bring the company’s industrial and energy technology (IET) segment a significant chunk of revenue, so Baker Hughes closely watches LNG demand and the status of planned LNG projects around the globe.

In 2023, global LNG demand reached 405 million tonnes per annum (mtpa), up 2% from 2022 demand. At the end of 2023, there was an estimated global nameplate capacity of 491 mtpa. Effective utilization averaged 86%, which represents a tight LNG market, Simonelli said.

Looking at 2024, the company forecasts a 2% increase in LNG demand, which should keep utilization rates at strong levels, he said. Nameplate capacity growth will trend with demand growth to keep global LNG markets at high utilization levels.

“The outlook for FIDs (final investment decisions) over the next few years remains strong, and we see projects progressing across all markets,” Simonelli said.

Baker Hughes expects FID on 65 mtpa of LNG in 2024. In 2025 and 2026, the industry could see between 30 mtpa to 60 mtpa of FIDs annually, bringing total potential LNG FIDs to 125 mtpa and 185 mtpa through 2026, he said.

Based on existing capacity projects under construction and future FID in the pipeline, Baker Hughes sees global LNG installed capacity reaching 800 mtpa by the end of 2030, he said, noting that represents an almost 75% increase in nameplate capacity from 2022 levels.

This outlook provides good visibility for significant near-term growth in the company’s gas tech equipment, and the installed equipment provides long-term structural growth for the gas tech services, he added.

2023 results

Baker Hughes reported fourth-quarter 2023 net income of $439 million on revenues of $6.8 billion, compared to third-quarter 2023 net income of $518 million on revenues of $6.6, and fourth-quarter 2022 net income of $182 million on revenues of $5.9 billion.

For all of 2023, the company reported adjusted EBITDA of $3.8 billion on revenues of $25.5 billion, compared to 2022’s adjusted EBITDA of $3 billion on revenues of $21.2 billion.

Simonelli said 2023 was pivotal for Baker Hughes, as the company reshaped itself by eliminating $150 million in costs, realigning its IET business and streamlining the oilfield services and equipment business.