Baker Hughes expects global upstream oil and gas spending to decline modestly in 2026 as producers remain disciplined with capital spending despite continued demand for energy. During its second-quarter earnings call, CEO Lorenzo Simonelli said operators are prioritizing production from existing assets while maintaining the flexibility to respond to changing commodity prices and market conditions.
The company expects spending growth in Latin America, offshore Africa, and North American land markets to help offset weaker investment across Europe and the Middle East. Baker Hughes also noted that geopolitical tensions in the Middle East, including disruptions related to the Iran conflict, are expected to have only a limited impact on overall business, although higher logistics costs and inflationary pressures are anticipated during the third quarter.
While traditional upstream markets remain cautious, Baker Hughes continues to see significant momentum in energy infrastructure. The company announced additional investment in gas turbine and generator manufacturing capacity, with new production expected to come online by 2029. This expansion supports an estimated $5 billion annual opportunity in power systems as demand grows from liquefied natural gas (LNG) facilities, industrial projects, and large-scale data center developments.
Second-quarter results reinforced that strategy. Baker Hughes exceeded earnings expectations, benefiting from strong Industrial & Energy Technology (IET) performance and a major equipment award for Venture Global’s CP2 LNG expansion project in Louisiana. The company also reported a record $7.1 billion in IET orders, including 2.3 gigawatts (GW) of power generation awards, multiple LNG projects, and significant gas compression equipment contracts.
Industry Impact
For North American oil and gas companies, Baker Hughes’ outlook suggests drilling activity may remain selective rather than broadly expanding through 2026. However, investment in LNG infrastructure, power generation, gas compression, and energy projects supporting artificial intelligence (AI) data centers continues to create substantial opportunities for equipment manufacturers, EPC firms, service companies, and suppliers.
Author: phinds