WEBVTT - Lorenzo Simonelli Talks Oil, Energy Projects

0:00:02.520 --> 0:00:10.840
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:12.800 --> 0:00:15.800
<v Speaker 2>Oil is holding near a seven month high as investors

0:00:15.840 --> 0:00:18.639
<v Speaker 2>away the next round of US Iran talks on Thursday.

0:00:19.000 --> 0:00:23.239
<v Speaker 2>Concerns about potential fallout from a US strike on Iran

0:00:23.440 --> 0:00:25.759
<v Speaker 2>or Iran closing the straight of horror moves have helped

0:00:25.840 --> 0:00:30.160
<v Speaker 2>drive oil higher this year despite expectations of a global glut.

0:00:30.240 --> 0:00:34.080
<v Speaker 2>Baker Hughes CEO Lorenzo Seminelli joins US now from Washington,

0:00:34.120 --> 0:00:36.880
<v Speaker 2>d C, where he is attending the Transatlantic Gas Security

0:00:36.920 --> 0:00:41.120
<v Speaker 2>Forum and Energy Aspects Conference. Lorenzo, thanks very much for

0:00:41.200 --> 0:00:44.239
<v Speaker 2>your time. What do you make, first of all, the

0:00:44.280 --> 0:00:46.479
<v Speaker 2>of the market right now. I mean, prices have been

0:00:46.560 --> 0:00:48.840
<v Speaker 2>driven higher, but we're still looking at a six handle

0:00:48.920 --> 0:00:52.879
<v Speaker 2>on NIMEX, and it seems like if there is a

0:00:52.960 --> 0:00:55.400
<v Speaker 2>conflict in the Middle East, that can go much higher

0:00:55.600 --> 0:00:56.200
<v Speaker 2>very quickly.

0:00:58.080 --> 0:01:00.280
<v Speaker 3>Well, great to be with you, and I I think

0:01:00.280 --> 0:01:03.880
<v Speaker 3>we all know that the aspect of price is very

0:01:03.960 --> 0:01:08.000
<v Speaker 3>much driven by geopolitics and also what's happening day to day,

0:01:08.080 --> 0:01:10.959
<v Speaker 3>and it's hard to predict what's going to take place.

0:01:11.400 --> 0:01:13.319
<v Speaker 3>I think what we look at from a Baker use

0:01:13.360 --> 0:01:16.200
<v Speaker 3>perspective is the fundamentals and when we look at the

0:01:16.240 --> 0:01:19.479
<v Speaker 3>long term. Demand is increasing, and we're going to need

0:01:19.840 --> 0:01:22.440
<v Speaker 3>to see the supply come online as we look at

0:01:22.440 --> 0:01:25.360
<v Speaker 3>the back half of twenty six into twenty seven, so

0:01:25.760 --> 0:01:28.200
<v Speaker 3>it will be range bound, but again it's going to

0:01:28.240 --> 0:01:31.280
<v Speaker 3>be driven by other factors than just the demand and

0:01:31.319 --> 0:01:34.400
<v Speaker 3>supply at this moment, and you're seeing it increase based

0:01:34.440 --> 0:01:36.759
<v Speaker 3>on the geopolitics situation at the moment.

0:01:36.840 --> 0:01:40.120
<v Speaker 2>Well, from a fundamental perspective, it seems like there's an

0:01:40.160 --> 0:01:43.679
<v Speaker 2>absolute glot of oil on Planet Earth. I mean, the

0:01:43.720 --> 0:01:46.760
<v Speaker 2>supply side seems to be winning out here, Lorenzo. Do

0:01:46.800 --> 0:01:47.760
<v Speaker 2>you see that differently?

0:01:49.880 --> 0:01:52.360
<v Speaker 3>I see that being a moment in time, And as

0:01:52.400 --> 0:01:55.880
<v Speaker 3>we've said previously, as we look at the twenty seven

0:01:56.040 --> 0:02:00.680
<v Speaker 3>twenty eight, we've got strong demand signals and actually twenty

0:02:00.760 --> 0:02:02.920
<v Speaker 3>six will be a year where we trough and we

0:02:02.960 --> 0:02:05.480
<v Speaker 3>see a recovery in the second half of the year

0:02:05.520 --> 0:02:09.600
<v Speaker 3>going into twenty seven. You've already got early indications from

0:02:09.880 --> 0:02:12.440
<v Speaker 3>what we're seeing from our customers in the Middle East

0:02:12.440 --> 0:02:16.440
<v Speaker 3>in particular relative to rig activation and also the expectation

0:02:16.600 --> 0:02:20.040
<v Speaker 3>that that supply demand comes into balance. And I think

0:02:20.080 --> 0:02:23.000
<v Speaker 3>again you've got to look at the fundamentals longer term

0:02:23.320 --> 0:02:26.600
<v Speaker 3>and whereas there's maybe oversupply at the moment, you see

0:02:26.639 --> 0:02:29.760
<v Speaker 3>that coming correction into twenty seven twenty eight, and the

0:02:29.800 --> 0:02:35.560
<v Speaker 3>fundamentals with population increasing, energy demand increasing, AI, oil and

0:02:35.600 --> 0:02:37.639
<v Speaker 3>gas is on the rise, and you're going to need

0:02:37.720 --> 0:02:38.320
<v Speaker 3>more supply.

0:02:39.160 --> 0:02:41.840
<v Speaker 1>How is that balance right now, Lorenzo, specifically with the

0:02:41.919 --> 0:02:46.079
<v Speaker 1>AI demand, is it yet outstripping the availability of these

0:02:46.120 --> 0:02:48.440
<v Speaker 1>new projects to come online and power them, be it

0:02:48.680 --> 0:02:51.720
<v Speaker 1>renewables or it be some parts of your business that

0:02:51.800 --> 0:02:53.639
<v Speaker 1>might be used in order to power it.

0:02:56.080 --> 0:02:59.040
<v Speaker 3>So at the moment, I think there's a bifurcation again.

0:02:59.080 --> 0:03:01.040
<v Speaker 3>You've got a good supply of oil. If you look

0:03:01.040 --> 0:03:04.480
<v Speaker 3>at gas, gas is the winner longer term. And as

0:03:04.520 --> 0:03:07.760
<v Speaker 3>you look at the fundamentals as well, we see gas

0:03:07.800 --> 0:03:11.880
<v Speaker 3>growing significantly over the course of now and twenty forty,

0:03:12.200 --> 0:03:15.240
<v Speaker 3>an increase in natural gas by twenty percent, and that's

0:03:15.280 --> 0:03:18.240
<v Speaker 3>what's going to be fueling a lot of the data centers.

0:03:18.280 --> 0:03:21.440
<v Speaker 3>And also as we look at the energy demand being

0:03:21.480 --> 0:03:24.880
<v Speaker 3>supplied by natural gas and the electrons being made by

0:03:24.919 --> 0:03:27.920
<v Speaker 3>the gas turbines that we supply and others supply, and

0:03:27.960 --> 0:03:31.480
<v Speaker 3>also the LNG that we're liquefying around the world and

0:03:31.800 --> 0:03:35.440
<v Speaker 3>going to the various locations, So there's a good supply

0:03:35.680 --> 0:03:37.960
<v Speaker 3>of base oil, and gas is the winner.

0:03:38.760 --> 0:03:41.160
<v Speaker 2>Talk to us about the data center demand. We all

0:03:41.160 --> 0:03:45.640
<v Speaker 2>see the incredible capex being dolled out right now from

0:03:45.680 --> 0:03:50.080
<v Speaker 2>the big hyperscalers. And you're a big player in this segment.

0:03:50.560 --> 0:03:52.880
<v Speaker 2>How much of your business is this driving?

0:03:55.120 --> 0:03:59.600
<v Speaker 3>Again, we recently took up our estimate from a turbine

0:03:59.640 --> 0:04:04.600
<v Speaker 3>perspse active to three billion of orders during twenty five

0:04:04.720 --> 0:04:08.920
<v Speaker 3>to twenty seven. That's a doubling of what we previously saw.

0:04:09.240 --> 0:04:13.200
<v Speaker 3>We just announced a nice win last week also with

0:04:13.280 --> 0:04:17.200
<v Speaker 3>regards to providing gas turbans our Frame five to a

0:04:17.440 --> 0:04:22.919
<v Speaker 3>data center operator, and again today announcing on the generator side.

0:04:23.000 --> 0:04:26.440
<v Speaker 3>So if you look at spend twenty twenty five, about

0:04:26.480 --> 0:04:28.960
<v Speaker 3>five hundred billion we're spent on data centers. We see

0:04:29.000 --> 0:04:32.560
<v Speaker 3>that increasing by twenty thirty to a trillion dollars, and

0:04:33.040 --> 0:04:36.640
<v Speaker 3>it is very much a meeting the demand at the moment,

0:04:36.760 --> 0:04:39.560
<v Speaker 3>and we are making sure we've got the right capacity

0:04:39.560 --> 0:04:42.440
<v Speaker 3>in place and we're serving our customers appropriately.

0:04:42.600 --> 0:04:44.760
<v Speaker 1>Well, you're in DC right now, where there's been a

0:04:44.760 --> 0:04:48.880
<v Speaker 1>big political focus on energy dominance for the United States, Lorenzo,

0:04:48.920 --> 0:04:51.599
<v Speaker 1>to what degree has that talk been followed up with action.

0:04:51.720 --> 0:04:55.440
<v Speaker 1>Is policy actually accelerating project approvals? Yet?

0:04:58.120 --> 0:05:01.640
<v Speaker 3>You know, we've seen this administration be very supportive and

0:05:02.040 --> 0:05:05.280
<v Speaker 3>as we look at the events today also, we're celebrating

0:05:05.320 --> 0:05:08.600
<v Speaker 3>the first cargo of LNG from the United States, and

0:05:09.160 --> 0:05:12.320
<v Speaker 3>I think it's important to note that ten years ago

0:05:12.600 --> 0:05:15.960
<v Speaker 3>we didn't have any LNG being exported, and today we're

0:05:16.000 --> 0:05:20.080
<v Speaker 3>one of the largest producers and exporters of LNG around

0:05:20.120 --> 0:05:23.640
<v Speaker 3>the world. And as you look at this administration definitely

0:05:23.640 --> 0:05:28.600
<v Speaker 3>supportive of continuing to see deregulation, continuing to see faster permitting.

0:05:29.000 --> 0:05:32.000
<v Speaker 3>Is everything solved yet, No, but they're working towards that

0:05:32.480 --> 0:05:35.880
<v Speaker 3>and continuing to be an energy supplier to the world

0:05:36.120 --> 0:05:38.719
<v Speaker 3>for affordable, secure, sustainable energy.

0:05:39.040 --> 0:05:44.159
<v Speaker 2>Yes, I mean amazing how much we've managed to ship

0:05:44.200 --> 0:05:49.200
<v Speaker 2>to Europe help them get off their dependence of Russian energy.

0:05:49.440 --> 0:05:52.040
<v Speaker 2>How much further do you think we have to go there, Lorenzo,

0:05:52.120 --> 0:05:54.279
<v Speaker 2>And how much is that being talked about in Washington.

0:05:57.160 --> 0:06:01.240
<v Speaker 3>The US is definitely a place that's abundant in natural gas,

0:06:01.320 --> 0:06:05.400
<v Speaker 3>and as has been said by Mini, there's many decades

0:06:05.440 --> 0:06:10.760
<v Speaker 3>ahead of plentiful supply, and so we've got several opportunities,

0:06:10.920 --> 0:06:15.520
<v Speaker 3>incremental projects that are currently going through final investment decision.

0:06:15.880 --> 0:06:18.680
<v Speaker 3>And as you look at the marketplace again, we see

0:06:18.680 --> 0:06:21.640
<v Speaker 3>there needing to be an installed based capacity of LNG

0:06:21.839 --> 0:06:25.760
<v Speaker 3>by twenty thirty five of nine hundred and fifty mtpa,

0:06:26.240 --> 0:06:29.159
<v Speaker 3>and so there's a long runway here out into the

0:06:29.200 --> 0:06:30.080
<v Speaker 3>next decade.

0:06:30.600 --> 0:06:32.919
<v Speaker 1>Lorenzo, thank you so much for joining us this morning,

0:06:32.880 --> 0:06:34.520
<v Speaker 1>and joy the rest of your time in Washington, DC.

0:06:34.680 --> 0:06:37.440
<v Speaker 1>Lorenzo Simonelli, CEO of Baker Hughes