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The world faces the highest geopolitical risks since the 1973 oil embargo, the chief executive of one of the largest oilfield service providers, Baker Hughes, told the Financial Times.
“From a historical context I’ve heard people say, you go back to the oil embargo of 1973 — that being somewhat similar,” Baker Hughes CEO Lorenzo Simonelli told FT in an interview.
The Russian invasion of Ukraine and the conflict in the Middle East could threaten further instability in the oil and gas markets, Simonelli noted.
The risks are stoking demand for LNG, a key growth area for Baker Hughes.
Global LNG demand is set to grow by 2% year-over-year in 2023, to reach close to 410 million tons annually, the company said last month as it reported higher-than-forecast earnings for the third quarter.
“Year-to-date, global LNG demand has reached record levels at just over 300 MTPA. This is despite softer than anticipated gas demand and economic weakness persisting in key LNG-consuming markets like Europe and China,” Simonelli said on the earnings call.
“Turning into 2024, we forecast LNG demand to increase by 3%, which should result in utilization rates remaining at elevated levels, as we forecast just 15 MTPA of nameplate capacity coming online next year.”
Baker Hughes believes that natural gas will play a critical role as both a transition and destination fuel.
“Accordingly, natural gas will be fundamental in satisfying the world's energy needs for many decades to come, while also improving air quality and reducing global emissions, displacing coal in the broader energy mix,” Simonelli said last month.
Looking into 2024, geopolitical risk will be a very important factor to monitor, the executive said.
Europe could see a tighter LNG market in case of a cold winter, after last year’s mild winter. The long-term prospects for LNG demand are bright, and “This is a good moment for LNG,” Simonelli told FT.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.