Upcoming projects in Russia, British Colombia and Texas could be worth nearly $2.5 billion in revenue

From the Houston Chronicle

The energy services company Baker Hughes is reaching beyond the oil field to a lucrative, growing market: liquefied natural gas.

The Houston company recently landed deals to make turbines and other equipment for LNG export terminals planned along the Arctic Coast of Siberia, the Pacific Coast of British Colombia and the Gulf Coast of Texas. LNG terminals are being developed around the world as many nations, concerned about climate change and pollutions, are shifting to cleaner burning fuels from coal.

“LNG is definitely a growth market,” Baker Hughes Vice President Marco Caccavale said. “Our outlook for new projects to receive positive final investment decisions remains strong.”

The company’s Turbomachinery & Process Solutions Division, which makes equipment for everything from offshore oil platforms and pipelines to LNG plants, brought in more than a fourth of the $22.9 billion of revenue that Baker Hughes received in 2018.

Related: Baker Hughes lands equipment contract with Golden Pass LNG

At LNG plants, the company’s turbines are used to generate the mechanical power needed to refrigerate methane down to -260 degrees Fahrenheit where it goes from a gas and becomes a liquid that is easy to load onto tankers and be shipped around the world.

Baker Hughes facilities in Italy will make turbines and other equipment for the Shell-led LNG Canada export terminal in British Colombia and the Exxon Mobil-led Golden Pass LNG export terminal in Port Arthur.

Although a final investment decision remains pending, Baker Hughes was selected by the Russian company Novatek to make turbines and other equipment for a second export terminal being built at the Arctic LNG facility on the Yamal Peninsula of Siberia.

Combined, the three LNG export terminal projects represent more than $75 billion of investment and will bring an additional 49 million metric tons of annual LNG production capacity onto the market.

“Obviously, there is momentum in the industry and it’s all for the right reasons,” Caccavale said. “Technology and innovation remain critical to the health of the industry because LNG is not only competing with other sources of energy but there is internal competition between projects. So, there’s a little bit of a race going on.”

Related: Baker Hughes to apply ‘plug and play’ concept to LNG Canada project

Baker Hughes’ Nuovo Pignone plant in Italy has been making turbines and other equipment for the LNG industry for more than 30 years. Installed at 110 production units around the world, equipment made at the plant is used to make more than 400 million metric tons of LNG per year.

Last year, Baker Hughes debuted a new turbine named the LM9000, which is touted as having 20 percent more power and being able to run 50 percent longer than other LNG turbines in its class – with 40 percent lower emissions.

The Arctic LNG 2 project in Russia will be the first project in the world to use the LM9000.

“The LNG business is a long-cycle and capital intensive business. So, risk abatement is everything,” Caccavale said. “We have kept moving the needle in terms of technology to be an enabler of customer productivity.”

With General Electric expected to divest its ownership stake in Baker Hughes, the companies have already entered into a series of agreements in November that outline long-term collaboration for turbine technology. Under the deals, Baker Hughes will maintain ownership of the LNG turbine technology.

Baker Hughes does not disclose prices for its turbines, but a recent report from the New York investment firm Evercore estimates that the Houston oilfield service company’s equipment generates $50 million of revenue for each 1 million metric tons of LNG production capacity.

Using that math, the upcoming project in Russia, British Colombia and Texas could be worth nearly $2.5 billion in revenue to Baker Hughes.

“In our view, this business is set to contribute more to Baker’s top and bottom lines with an inflection that will likely be realized in 2020, amid the buildout of the numerous liquefaction plants, export terminals and regasification facilities,” Evercore analyst James West wrote inthe report.

 


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