LNG

US utility Sempra, whose assets include LNG projects on the US Gulf Coast and Mexico and natural gas and power businesses in California, reported full-year earnings of $2.09 billion compared with $1.25Bln in 2021 and was preparing an imminent final investment decision on the Port Arthur LNG project in Texas.

Baker Hughes, the LNG equipment-maker and energy services company, reported an increase in first-quarter revenues to $4.83 billion and a 70 percent jump in operating income to $279 million while forecasting LNG final investment decisions on up to 150 million tonnes per annum of projects in the next two years.

The company, which has main offices in Houston and London, reported net income of $72M in the quarter to the end of March 2022 versus a loss of $452M in the same three months of 2021.

“Our first quarter results reflect operating in a very volatile market environment during the first few months of 2022,” said Lorenzo Simonelli, Baker Hughes Chairman and Chief Executive.

“On the positive side, we recorded strong orders from Turbomachinery and Process Solutions (TPS) as the LNG order cycle continues to unfold,” stated the CEO.

The company said TPS orders totalled $3Bln for the second consecutive quarter, driven again by strong orders in LNG.

“We believe that we are at the beginning of another constructive LNG cycle, which is being expedited by the current geopolitical situation, particularly for US LNG projects,” stated Simonelli.

“As these market dynamics play out, a number of projects should accelerate, and we now believe that 100 to 150 MTPA of LNG FIDs will be authorized over the next two years with additional FIDs becoming more likely in 2024 and 2025,” declared the CEO.

Record orders

Orders in the quarter were $3.0Bln, up $1.6Bln year-over-year and a new quarterly record for TPS.

Simonelli said that equipment orders were up $1.5Bln year-over-year, driven by a significant award to provide an LNG system for the first phase of US company Venture Global’s Plaquemines LNG project, located south of New Orleans on the Mississippi River in Louisiana.

Service orders in the quarter were up 8 percent year-over-year, primarily driven by growth in contractual and transactional services, partially offset by lower order volumes in upgrades.

Overall orders in the quarter were $6.8Bln, up 3 percent versus the three months to the end of 2021, driven by Oil Field Equipment and TPS, partially offset by a decrease in Digital Solutions and OFS.

Year-over-year, revenue was up 1 percent compared with $4.78Bln in the prior-year quarter, driven by increases in OFS and Digital Solutions, partially offset by decreases in OFE and TPS.

Adjusted operating income was $348M, which excluded $70M of restructuring, separation and other charges.

Russia issue

As regards the conflict in Ukraine, Baker Hughes said Russia represented roughly 4 percent of total company revenue in the first quarter.

“We recently announced that we have halted all new investment in the country,” said the company.

Oilfield Services revenues in the quarter amounted to $2.5Bln, down 3 percent from the previous three months.

“International revenue was down 7 percent sequentially led by declines in the North Sea, Russia Caspian, the Middle East, and Latin America,” said Baker Hughes.

Moving to the Oilfield Equipment division, the company said that orders for the quarter were $739M, double the $394M achieved in the same three months of 2021.

It added that the strong orders performance was driven by subsea production systems (SPS), supported by a large subsea tree contract in Asia, along with growth in flexibles, surface pressure control and services.

“As a reminder, we removed Subsea Drilling Systems from consolidated OFE operations when we completed the merger with MHWirth in the fourth quarter of 2021,” Baker Hughes explained.

The company concluded that revenue in the division was $528M, down 16 percent year-over-year, primarily driven by SPS, SPC and the removal of SDS, partially offset by growth in services and flexibles.

North America is to drive capacity growth in the global LNG liquefaction industry from planned and announced projects between 2019 and 2023.

This will contribute around 73% of global growth by 2023, according to GlobalData, in a report entitled ‘Global LNG Liquefaction Industry Outlook to 2023 – Capacity and Capital Expenditure Outlook with Details of All Operating and Planned Liquefaction Terminals’. 

The report reveals that North America is expected to have a newbuild liquefaction capacity of 243 mill tonnes per annum by 2023. Already announced projects account for most of the newbuild capacity in the region.

Soorya Tejomoortula, Oil and Gas Analyst at GlobalData, said: “North America is expected to add 26 newbuild LNG liquefaction terminals during the outlook period. Among these, Rio Grande is the largest newbuild liquefaction terminal, which is expected to start operations in 2023 with a capacity of 27 mill tonnes per annum.”

Following North America, GlobalData said that the Middle East was the second highest region in terms of global LNG liquefaction capacity growth.

This region will add newbuild liquefaction capacity of 32 mill tonnes per annum by 2023. Qatar’s LNG terminal expansion project was the only announced terminal in the Middle East and thus accounted for entire capacity growth by 2023.

The Former Soviet Union (FSU) stands third with newbuild LNG liquefaction capacity of 29 mill tonnes per annum during the period under review. Russia accounts for all the capacity growth in this region with four projects, the report said.

The Royal Dutch Shell-led LNG Canada project has become the main issue in the province of British Columbia in the run-up to the Canadian federal election this year, with Prime Minister Justin Trudeau emerging as a supporter of the venture amid renewed protests.

US major ExxonMobil and its Canadian subsidiary Imperial Oil Resources have decided not to proceed with their plans for an LNG export project near the Port of Prince Rupert, where a liquefaction plant was proposed on the same scale as Royal Dutch Shell’s LNG Canada joint venture.