BHGE AM '18: CEO Simonelli pushes improved project economics in new energy cycle

FLORENCE - By Adrienne Blume, Executive Editor, Hydrocarbon Processing and Editor, Gas Processing

Lorenzo Simonelli, Chairman and CEO of BHGE, opened up the 2018 BHGE Annual Meeting (BHGE AM) in Florence, Italy, on January 29 with a talk welcoming attendees. The 19th Annual Meeting is a record year for attendance, according to the CEO.

New energy cycle brings strength, lasting change. Mr. Simonelli shared some background information on the merger of Baker Hughes and GE in July 2017, a move that was inspired by the two companies' desire to help the industry face its challenges. He noted that 2017 began with a "bearish outlook," but that it had turned out to be "an incredible year."

"As we ended 2017, we started to see supply and demand rebalance," Mr. Simonelli said. "And as we enter into 2018, the situation has become more balanced. It looks brighter. People are starting to spend again."

However, the CEO also noted, "Energy has gone through a massive change, and it's not going to go back … We cannot be lulled into thinking that the new cycle will make everything all better."

State of the industry and the digital revolution. In the context of the present industry environment, Mr. Simonelli noted that keeping pace with the digital revolution is key.

"There are new players in digital revolution coming onto the scene, looking to seize their share of the industry," he noted. "Is it a threat? Is it an opportunity? Time will tell, but we know this mega-trend is upon us, and we will have to face it."

The industry must also confront the public perception of oil and gas operations as "dirty and polluting," the CEO said. The industry can address this perception by offering and promoting cleaner energy sources, such as natural gas, and by minimizing carbon footprint with new production methods.

Focus on project economics, not oil price. Mr. Simonelli also addressed several macro-trends the industry is facing, including lower spending, slower CAPEX growth, and lower-cost producers.

He noted, "It's not the oil price that matters anymore; that's not the point. It's reducing CAPEX that matters … and making radical improvements in project economics. It is imperative that we continue to evolve, to change and to address this reality," the CEO said.

BHGE is moving forward with these changes with its "50/50/50" strategy—a targeted 50% reduction in doing business, a 50% improvement in productivity and a 50% increase in digital enablement. The organization will target integration of supply chains and operations, which will ensure that it is delivering a fully integrated view.

Mr. Simonelli cited a BHGE project in Papua New Guinea (PNG) as an example of elements of its strategy in action. "In PNG, we are building a [natural] gas processing solution that stretches from the wellhead all the way through to point of export," the CEO said. "That radically redefines the way that you look at total cost of ownership."

Digital fast-track for the upstream. Mr. Simonelli also noted that exciting updates will be introduced during the 2018 Annual Meeting to GE's Digital Twin technology, which the company demonstrated at its 2017 Annual Meeting.

He also discussed BHGE's launch of an upstream digital enablement initiative with ERP [enterprise resource planning] transformation to support full-stream operations. During the week, BHGE will announce an example of digital enablement in a partnership with Royal Dutch Shell.

This enablement initiative will allow Shell to achieve faster placements of wells, reserves and estimations. "What used to take years can be done in weeks, from a geological mapping perspective," the CEO said.

The BHGE AM is taking place in Florence, Italy from 29–30 January, featuring technology demonstrations and a number of discussions by executives from BHGE and its operating partners. Stay tuned for more coverage.

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