Page 8 - NorthAmOil Week 05 2021

NorthAmOil COMMENTARY NorthAmOil

Baker Hughes predicts

3-4 LNG FIDs in 2021

Oilfield services firm Baker Hughes anticipates that 3-4

LNG export projects will be sanctioned this year as the

industry recovers from the pandemic-related downturn

GLOBAL OILFIELD services firm Baker Hughes has reit-
erated its expectations that demand for LNG will
WHAT: grow in the longer term. Baker Hughes’ chair-
Baker Hughes predicts man and CEO, Lorenzo Simonelli, said during
that 3-4 liquefaction the firm’s fourth-quarter earnings call that it
plants will reach FID this anticipated 3-4 LNG projects moving forward
year. in 2021. This would be followed by “a robust
pipeline” of LNG projects that Baker Hughes
WHY: expects to reach the final investment decision
A recovery is underway, (FID) stage beyond 2021.
and Baker Hughes’ The company’s outlook has been bolstered by
outlook has been the recent increase in LNG spot prices, which
bolstered by improving Simonelli said had “solidified a similar view for
LNG spot prices. many of our customers and improved momen-
tum for a number of projects”.
WHAT NEXT: LNG spot prices in Northeast Asia hit record
The company expects that highs of around $32.50 per million British
gas will be a “transition thermal units ($898.95 per 1,000 cubic metres)
and destination fuel” in at the start of this year. This occurred as cold-
the longer run. er-than-expected winter weather, certain sup- of 2020. Simonelli noted that this followed the
ply outages and shipping delays combined, main refrigerant compression award, which the
prompting a scramble to secure supplies. The company booked in the third quarter of the year.
spike already appears to be abating, with the
International Energy Agency’s (IEA) senior gas Targeting FID
analyst, Jean-Baptiste Dubreuil, warning last FIDs, which picked up significantly in 2019,
week that what played out in January did not slowed in 2020 as the coronavirus (COVID-
indicate a “major” rebound in global demand 19) pandemic caused demand for LNG to drop,
over the remainder of 2021. Meanwhile, up to exacerbating the existing oversupply in the
five LNG cargoes scheduled for loading from market. Only one LNG FID – on Sempra Ener-
US terminals in March are expected to be can- gy’s Energía Costa Azul (ECA) LNG project in
celled by traders, cited by Reuters. It is worth Mexico – was announced in 2020, towards the
noting, however, that congestion in the Panama end of the year, when the recovery was already
Canal – which contributed to the January price underway.
spike – is ongoing, prompting buyers to look at Several other developers deferred scheduled
spot supplies from other sources. FIDs on their projects until 2021. While analysts
Nonetheless, Simonelli is confident that have expressed scepticism about all of these pro-
the LNG market will perform better this year. jects moving forward, several still have 2021 as
He noted that one of the priorities for Baker their target date for an FID – though this can be
Hughes’ Turbomachinery & Process Solutions delayed again.
(TPS) division was executing the “significant Among the companies talking about sanc-
backlog” of LNG projects awarded in recent tioning projects this year is US-based Tellurian,
years. whose co-founder and executive chairman,
Recent contracts awarded to Baker Hughes in Charif Souki, said earlier this month that he
the LNG space include an additional award for hoped the company’s Driftwood LNG terminal
power generation for the North Field East LNG would be under construction this summer.
expansion project in Qatar in the fourth quarter Souki echoed Simonelli’s expectations that

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