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Oil price environment looks ‘constructive’, says Baker Hughes top executive

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(S&P Global Platts) Continued signs of global economic recovery from the coronavirus pandemic should prompt further demand growth for oil and natural gas, not only for second-half 2021 but for 2022, big oil services provider Baker Hughes’ top executive said July 21.

While the pandemic continues to impact the world’s geographic areas unevenly, the oil price environment looks “constructive” as demand increases and operators maintain spending discipline they have developed through nearly 18 months of austerity, Baker Hughes CEO Lorenzo Simonelli said during a second-quarter earnings call.

Echoing comments by Halliburton CEO Jeff Miller a day earlier during that company’s quarterly call, Simonelli said he sees a “solid step-up” in international growth in H2 2021, while North American rig counts should continue to “trend a little higher” over the same period.

“Based on discussions with our customers, we expect international activity to gain momentum over the second half of the year and lay the foundation for growth in 2022,” Simonelli said.

“In North America… we generally expect the rig count to continue to trend a little higher over the second half of the year.”

“When you look at 2022, again, we anticipate solid growth with the prices holding at the range they are now,” he said.

Gas, LNG fundamentals seen strong

For natural gas and LNG, fundamentals are equally as strong, if not better, than oil, from both outages and strong demand in Asia, Latin America and Europe which have pushed Q3 2021 LNG prices to levels not seen since 2015, said Simonelli.

He noted hot weather in Europe and the US has caused demand improvement and lower gas storage levels, while structural growth continues to improve in Asia; Chinese LNG imports were up almost 30% in H1 2021 versus H1 2020.

Based on a strong pace of current growth for natural gas and increased demand for cleaner energy sources, “we maintain our positive long-term outlook for natural gas and LNG,” Simonelli added.

Outside of fossil fuels, momentum for cleaner energy projects continues to increase, he noted. Various global projects for wind, solar and green and blue hydrogen are moving forward, as are carbon capture, utilization and storage (CCUS) projects.

So far this year, 21 CCUS projects have been announced and are in early-development stages, compared to 19 such projects announced in 2020, said Simonelli.

Progress on green projects

During Q2, Baker Hughes has continued to position itself for some of what Simonelli called “new energy frontiers” involving partnerships and collaborations with clean-energy providers. These include:

** Most recently, a collaboration with Samsung Engineering for low- to zero-carbon projects using hydrogen and CCUS technologies to identify joint business opportunities to reduce emissions of both Korean energy companies and global industrial customers.

** Deployment of Baker Hughes’ compression and gas turbine technology, as well as flexible pipes for transportation in hydrogen.

** In CCUS, the company will provide reservoir studies, well construction services, flexible pipes, condition monitoring solutions and related services such as carbon dioxide compression and liquefaction for industrial assets.

** A memorandum of understanding with Borg CO2, a Norwegian CCUS developer, to collaborate on a carbon capture/storage (CCS) project that would be a hub for decarbonization of industrial sites in the Viking region of Norway.

** A collaboration with Bloom Energy, a leading clean energy player with solid oxide fuel cell technology in natural gas and hydrogen, which also has a growing electrolyzer presence. The collaboration will seek commercialization of integrated low-carbon power generation and hydrogen solutions.

** Investment to expand Baker’s CCUS portfolio with power to gas and energy storage solutions. The company will combine its post-combustion carbon capture technology with biomethane technology to transform CO2 emissions into synthetic natural gas, a low-carbon fuel capable of being used across multiple industries.

** A collaboration with Air Products, a leader in hydrogen, to develop next-generation hydrogen compression and accelerate adoption of hydrogen as a zero-carbon fuel.

Simonelli has said the addressable market of hydrogen by 2030 is $25 billion-$30 billion and the CCUS market is $35 billion-$40 billion for Baker Hughes.

Bid activity and inquiries about those project types with customers in the last six months are up two-fold compared to Q4 2020, Baker Hughes Chief Financial Officer Brian Worrell said.

“Activity levels have definitely increased,” Worrell said. “I expect to continue to see that to increase. Exactly when they’ll turn into orders, it’s a bit tough to say right now, but there’s a lot going on.”

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