BP and Baker Hughes CEOs Signal Major Energy Infrastructure Buildout

Energy executives meeting in Abu Dhabi this week indicated that consumers and businesses should expect a major expansion of physical infrastructure, including more storage facilities and pipelines, over the coming years. This buildout is driven by rising consumption from artificial intelligence, population growth, and developing nations, though the pace of delivery may be slower than projected due to high interest rates and geopolitical friction.

Lorenzo Simonelli, the chief executive of Baker Hughes, described the outlook as a 'demand decade.' He told CNBC's Dan Murphy on 'Access Middle East' at the ADIPEC energy conference that capital investments would increase over time to support this growing consumption. Simonelli predicted that industry activity would rise by a low single-digit percentage in 2027. He noted that the current Middle East conflict has underscored the need for a more resilient energy system, requiring the elimination of existing choke points.

Meg O'Neill, the CEO of BP, addressed the uncertainty surrounding oil prices and the long timelines associated with new projects. She stated that the company must plan its business for a lower-price environment. O'Neill pointed out that the wide range of global energy demand forecasts is a key factor in investment decisions, given that new oil and gas projects can take years to develop and remain in production for decades.

Markus Krebber, the head of German energy company RWE, acknowledged that artificial intelligence and electrification are driving electricity demand. However, he noted that geopolitical tensions, supply chain pressures, and higher interest rates are complicating investment decisions. During a separate ADIPEC discussion, Krebber said that while the investment opportunity is huge, the environment is challenging. Regarding expansions in computing capacity and the power needed to support them, he said, 'it's going to come, but it probably comes slow.'

Olivier Blum, the CEO of Schneider Electric, observed that some projects in the Persian Gulf have slowed because of the Middle East conflict. He told CNBC that in the mid-term, the opportunity for more infrastructure has increased. The investment equation also depends on the supply outlook, with Richard Bronze, co-founder and head of geopolitics at energy consultancy Energy Aspects, warning of potential market oversupply.

Bronze said that supply and demand forecasts project an oversupplied market in 2027 and 2028, assuming Middle Eastern flows return to normal. This potential surplus adds another layer of complexity for companies deciding where and when to commit capital to new energy infrastructure.

The ADIPEC energy conference in Abu Dhabi serves as a central forum for these discussions, with leaders from major oil, gas, and electrical engineering firms weighing the balance between long-term demand growth and short-term economic headwinds.