Baker Hughes sees no slowdown in energy projects despite higher rates as AI buildouts stoke LNG demand
Baker Hughes has yet to see higher borrowing costs slow investment in major energy projects, with its chief executive pointing to robust demand for natural gas and power from the global buildout of artificial intelligence infrastructure.
"We haven't seen a slowdown, and the bankability is really based on the offtake agreements that are in place, as well as the outlook of energy demand," Chairman and CEO Lorenzo Simonelli told CNBC at the Gastech conference in Bangkok.
Financing remains an important consideration for projects, Simonelli said, but rising energy needs from population growth, industry and data centers continue to underpin investment.
"Energy demand is not necessarily going to slow down with the increasing population, with the increasing linkage between industrial outcomes of data centers and AI, it's intrinsically linked with energy supply and energy sources," he said. "So we haven't seen that as of yet, and we continue to monitor it."
Simonelli's comments come as the Iran war has disrupted Middle Eastern energy flows and sent oil prices back above $100 a barrel, adding to concerns over inflation and borrowing costs.
The conflict has also disrupted natural gas markets, with restrictions on shipping through the Strait of Hormuz threatening LNG supplies from Qatar, one of the world's largest exporters.
Simonelli said high prices themselves can spur the investment needed to eventually bring additional supply to market.
"It's 'full steam ahead' with the aspect of looking beyond the short term, and obviously high pricing also leads to investment today, which will lead to supply coming in tomorrow," he said.
Baker Hughes expects prices ultimately to remain range-bound and sees little risk that a coming wave of LNG supply will create a prolonged glut. The company estimates that installed LNG capacity will need to reach 900 million tons per annum by 2035 to meet future demand.
AI is emerging as an increasingly important source of that demand. Simonelli said Baker Hughes does not expect the rapid expansion of data centers to slow, even as concerns grow over their electricity and water consumption.
"We think there won't be a slowdown," he said, adding that Baker Hughes is increasing capacity to meet demand.
In Southeast Asia, grid constraints are also leading some data-center operators toward behind-the-meter and distributed power generation, an area where Baker Hughes provides equipment.
Simonelli sees natural gas playing a central role in meeting those growing electricity needs. Baker Hughes has just over $37 billion in backlog, including demand tied to gas infrastructure, data-center power generation and LNG, he said.
"As you look at natural gas, it's not a transition fuel; it's a destination fuel," he said. "We're in an energy demand decade, and gas is central to it."
