Recent spot price weakness and fewer sanctions expected this year for export projects have not changed the overall long-term supply and demand picture for liquefied natural gas (LNG), Baker Hughes Co. CEO Lorenzo Simonelli said Wednesday.

Houston-based Baker Hughes (NYSE: BKR), which provides, among other things, equipment to build gas export projects worldwide, is expecting gas demand to continue to increase even with the growth in renewables, Simonelli said during a conference call to discuss 4Q2019 results.

“If you look at recent LNG spot price weakness, it doesn’t change the overall long-term LNG demand and supply dynamics,” he said. “In fact, the conversations we’re having with our customers is really toward the continued demand for LNG over the long term.”

Global gas demand is estimated to grow to 550-600 million metric tons/year (mmty) by 2030. That much consumption would require an estimated 700 mmty of installed capacity.

Around 90 mmty of LNG capacity was sanctioned in 2019. Another 50 mmty of capacity is likely to be sanctioned this year, Simonelli said.

“You’ve still got another 150, 250 that’s got to go in the next coming years. So we feel good about the LNG space and we feel good about the long-term aspect of it.”

The Turbomachinery & Process Solutions (TPS) business segment, which includes LNG equipment, reported orders fell 10% year/year in the final period, with equipment orders down 16% and service orders off 4%. The TPS business had been the strongest during 2019, as U.S. gas export developers and global operators, built record capacity.

However, the global view for continued gas demand is strong, Simonelli told investors.

While there is a “wide range of predictions for growth or peak demand for the different types of hydrocarbons in the coming decades, our view remains that in almost any scenario natural gas will be the key transition fuel and perhaps even a destination fuel for a lower carbon future.

“As a result, we believe that natural gas demand will grow at more than twice the pace of oil over the next 10 years and that LNG demand growth will be higher still at an annual rate of 4% to 5%.”

Within the TPS segment, Baker does not expect to see an “exceptionally strong year” for LNG final investment decisions (FID) as in 2019.

“Our outlook for this segment remains constructive as we execute the largest backlog in the company’s history and expect continued growth in services and non-LNG equipment awards,” Simonelli said. “For the LNG portion of our TPS segment, our outlook remains constructive, despite some softness in the near-term spot prices. Conversations with our customers have not changed materially,” even as “price weakness persists.”

There is likely to be a “shift” in the balance of future FIDs for LNG projects “toward more economically advantage brownfield projects in the 2021-2025 timeframe,” Simonelli said. “We believe that FID activity in 2020 should remain solid and at least in line with the average annual FID levels witnessed in the prior cycle between 2011 and 2015.”

As it executes on its near- and long-term strategic initiatives, management is “also mindful of the ever-changing macro backdrop across the energy markets,” said the CEO. “On this note, we generally believe that macro fundamentals have slightly improved over the last few months as dynamics from both the demand and supply side have become more positive.”

The macro environment is tempered by growing geopolitical risks, mostly in the Middle East, he said. On the demand side, “the outlook for oil and gas has modestly improved” with the recent phase one trade deal between the United States and China, and there is “continued positive economic data” from the United States.

“We believe that these variables should be supportive of a firm oil demand outlook in 2020 and one in which our customers will continue to execute their budget plans and advance important projects,” Simonelli said.

The supply side is bolstered too with the recent round of production cuts by the Organization of the Petroleum Exporting Countries and its allies “and more signs of slowing U.S. production growth,” he said. A “growing commitment” to capital discipline by exploration and production (E&P) customers also should support a more constructive macro outlook.

Within the Oilfield Services (OFS) segment, North American drilling and completion spending this year is trending toward the “low double-digit decline rate” versus 2019.

“This view is based on early E&P budget announcements and the lower exit rate in 4Q2019,” Simonelli said. “We continue to believe that our differentiated OFS portfolio will provide somewhat of a buffer to the challenges in the North American markets.”

Similar to recent quarterly commentary by management teams for peers Schlumberger Ltd. and Halliburton Co., growth is expected from the international business and in the offshore.

Net income in 4Q2019 fell 63% year/year and 15% sequentially to $48 million (7 cents/share). Operating income was off 13% from a year ago but up 11% from 3Q2019 at $331 million. Cash flow climbed 25% from a year ago to $1.36 billion, while free cash flow rose 20% to $1.05 billion.

Baker last year also accelerated its separation efforts from General Electric and relaunched its brand.

“In the near-term, we continue to identify and execute on opportunities to improve our day-to-day operations and cash flow efficiency,” Simonelli said. “On a longer-term basis, we see several attractive growth opportunities for our company, and we remain focused on positioning Baker Hughes for the upcoming energy transition and the digital transformation of the industry.”

Want to see more earnings? See the full list of NGI’s 4Q2019 earnings season coverage.