Baker Hughes Sees No Brakes on Energy Projects as AI Ignites LNG Demand

Baker Hughes has not seen higher borrowing costs slow investment in major energy projects, as strong demand for natural gas and power continues to support spending tied to the global expansion of artificial intelligence infrastructure.

Chairman and CEO Lorenzo Simonelli said financing remains an important consideration, but energy requirements linked to population growth, industrial activity and data centers continue to underpin investment decisions.

“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,” Simonelli told CNBC at the Gastech conference in Bangkok.

His assessment points to the offtake agreements supporting individual projects and the broader outlook for energy consumption. Despite elevated financing costs, Baker Hughes has yet to detect a retreat in major project investment.

Simonelli connected the investment outlook directly with rising power requirements across several parts of the economy. Population growth remains one source of demand, while industry, data centers and artificial intelligence are adding further pressure on energy supply.

“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.”

Those comments come as the Iran war disrupts Middle Eastern energy flows and pushes oil prices back above $100 a barrel. That increase has added to concerns about inflation and borrowing costs as companies consider investment in large energy developments.

The conflict has also disrupted natural gas markets. Restrictions on shipping through the Strait of Hormuz are threatening LNG supplies from Qatar, which is one of the world’s largest exporters.

Even with those pressures, Simonelli said elevated prices can encourage the investment required to bring more supply into the market later. His outlook emphasizes spending beyond immediate market disruption and volatility.

“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 ultimately expects prices to remain within a range. The company also sees little danger that the approaching wave of LNG supply will produce a prolonged glut in the global market.

Its outlook calls for installed LNG capacity to reach 900 million tons per annum by 2035 to satisfy future demand. That estimate reflects the scale of additional capacity Baker Hughes believes the market will need over the coming years.

Artificial intelligence is becoming an increasingly important contributor to that demand. Simonelli said Baker Hughes does not expect the rapid expansion of data centers to slow, despite mounting concerns about the electricity and water consumed by those facilities.

“We think there won’t be a slowdown,” he said. Simonelli added that Baker Hughes is increasing capacity to meet the expected demand.

Grid constraints in Southeast Asia are also changing how some data center operators secure electricity. Some are moving toward power generated behind the meter and distributed generation, both areas in which Baker Hughes supplies equipment.

Simonelli expects natural gas to occupy a central position in meeting the resulting growth in electricity requirements. Baker Hughes has just over $37 billion in backlog, including demand associated with gas infrastructure, data center power generation and LNG.

The backlog gives the company exposure to several connected areas of energy investment. Gas infrastructure supports fuel delivery, while power generation equipment and LNG capacity address the expanding requirements identified by Simonelli.

“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.”

That view places natural gas at the center of Baker Hughes’ expectations for the current period of energy demand. For the company, AI infrastructure, data center expansion and LNG investment remain linked to the need for dependable power and additional supply.