Baker Hughes, a GE company is in the early stages of evaluating its services and equipment offerings to develop an optimal portfolio to compete in the current market and through the energy transition, the company's chief executive said.
As Baker Hughes focuses on highly differentiated and less fragmented areas of the oilfield services and equipment business, the company plans to leverage its position in the LNG market.
CEO Lorenzo Simonelli said natural gas is the critical transition fuel as oil demand growth slows and demand for renewable energy sources accelerates. During a Sept. 3 presentation at Barclays CEO Energy-Power Conference, he said that by 2030 LNG demand is expected to be approximately 550 million tonnes per annum.
The LNG market has worked well for Baker Hughes, as every major project that reached final investment decision in the past three years selected Baker Hughes' technology, Simonelli said.
In the most recent final investment decision cycle the LNG market is unfolding as expected, he said. Of the 100 mtpa the company outlined early in the year, 60 mtpa has reached a final investment decision, he said.
Venture Global LNG's Calcasieu Pass project is part of that total. Baker Hughes will provide an LNG liquefaction train system with 18 modularized compression trains across nine blocks, for a total nameplate capacity of 10 mtpa.
The company's Turbomachinery & Process Solutions segment provides the liquefaction train system that offers a "plug and play" approach, which enables faster installation and lowers construction and operational costs, Simonelli said.
The LNG market is pushing Turbomachinery & Process Solutions segment activity higher. In December 2018 PAO NOVATEK selected Baker Hughes' liquefaction technology for its massive Arctic LNG 2 project. In the second quarter, Baker Hughes received an order for the first two trains, each of which will produce up to 6.6 mtpa of LNG, the CEO said.
Other LNG projects include Exxon Mobil Corp.'s Golden Pass export terminal in Texas, BP PLC's Tortue venture in West Africa, and others in North America, Qatar, Mozambique and the Arctic.
"We see the opportunity to grow more in the gas value chain with our Turbomachinery segment," Simonelli said Sept. 3. Baker Hughes will also grow the downstream space for its Digital Solutions segment and will expand its industrial and chemicals presence across its portfolio, he said.
This increased focus on growth in areas where Baker Hughes can generate value for its customers has become critical amid changes in the competitive landscape for oilfield services.
Over the past five years the competitive landscape for oilfield services and equipment companies has significantly changed, Simonelli said. An influx of competitors for some of the services Baker Hughes provided can operate at a lower cost base and offer services that are "good enough for some customers," he said.
Baker Hughes will seek to leverage its existing portfolio and technology as the company prepares for the unfolding energy transition, to capture the high-value, higher-tech opportunities along the value chain.
"Over time, we believe this portfolio composition will result in lower overall volatility of earnings and cash flows, a bias towards businesses with aftermarket service potential and an alignment to long-term trends in global energy supply and demand," Simonelli said.
The company's portfolio is significantly less capital-intensive than its peer group, Simonelli said. "Since we formed Baker Hughes, we have spent just under 3% of revenues on net CapEx. And importantly, we don't see a need to increase CapEx meaningfully, even as our revenue ramps up over the coming years," he said.
"We believe we have a unique and differentiated business model that has demonstrated the ability to achieve strategic initiatives organically," he said.
