Baker Hughes Company (BKR) Earnings Call Transcript & Summary

We'll now have some introductory remarks from our JPMorgan host, Arun.

We're pleased to host Rod Christie, Executive Vice President of the Turbomachinery & Process Solutions segment at Baker Hughes as part of our JPMorgan Global Hydrogen Week. The fireside sat will focus on Baker's unique full stream technology offerings in the hydrogen space, and it's growing importance to the TPS business in the coming years. Rod has led the TPS business unit since 2016, prior to which he held several leading management and operating roles at GE Oil and Gas. How are you, Rod?

Good, Arun. Thanks for having us.

Great to see you. I know it's been a very busy time for you. So we really appreciate you carving out some time from your business. But before diving into hydrogen, you arguably lead one of the most important businesses at Baker Hughes, TPS, which accounts for about 30% of the top line and 40% of the EBITDA. For the generalists who are joining us today, if you could talk about some of the key drivers of the TPS business.

Arun, I think, look, probably a lot of people who are watching know us obviously for our LNG operations and what we do in LNG with the technology, whether that's compression, gas turbine drivers, hybrid, electric and different power sources or laterally obviously, the operations we've had around Venture Global with a liquefaction -- tool liquefaction train. So certainly, you recognize that. Sticking so really around the rotating equipment process type of activity, the onshore and offshore production, whether that's gas compression, whether that's power generation to support onshore and offshore production. And then through into sort of refining petrochemical pipeline applications of compression, moving -- really moving hydrocarbons from point A to point B. And then really some of the industrial applications that we have, some of the technology that plays into sort of the broader industry. And that really -- you think of a business large project operations, technology heavy, anywhere on the planet. Really the ability for the company to go and execute a project in some very tough environments and deliver an outcome for the customer and then support it through our services operations for basically the lifetime of the facility. So that's really where the business is.

Great. You talked about the leverage to LNG, which is kind of a unique market-leading product line for you guys. But could you talk about recent backlog trends? And how do you see backlog trending over the balance of the year just given how we're in a very, very tight global gas market just given overall tightness most of the pandemic.

Yes. I mean certainly, you see a lot of momentum now in a number of gas projects. Certainly, North American gas looks pretty solid. And then really starting to think about some of the other projects that have been hanging around the hoop for a while over the last few years internationally. I mean clearly, we're working to execute on Qatar, and we're working closely to look at the expansion on Qatar. You still see Mozambique up around the place. Obviously, we've delivered to Mozambique with Eni offshore and Total onshore. We're in that process. And then a lot of activity in North America. I'd say some interesting projects in Mexico as well, more on the Pacific Coastline side.

Got it. Got it. And just what are you seeing in terms of your backlog?

I mean I think backlog, we're looking at continuously a positive book-to-bill. So we should go through the year in -- all being well, we come out with slightly more backlog obviously than we went in. So growing revenues year-over-year and hopefully continue to accrete to backlog.

Got it, got it. Then are you seeing any urgency in terms of the backlog is -- we have very, very high global gas prices are trending over $25 a ton. Today there's been a big gap between U.S. and global prices.

I think there's certainly a tremendous amount of tailwind in U.S. projects just now. I think the modular capability we've delivered to Venture Global, for example, substantially faster than the traditional stick build operations. I think you still look at the long goal attempt really is probably regulatory permits, licenses and approvals. I think anyone who wants to really talk to us around a structured product from us is something that I think we could comfortably deliver in any regulatory approval cycle. And then I think you see obviously an approach to try and get more at the existing facilities, whether that's extend outages, tweak and a lot of debottlecking has already gone on. The question now is what else can we do? So a lot of engagement of looking at engineering feasibilities to understand how much we can tweak. Certainly, any extra ton of LNG at this point in time is a premium.

Okay. Let's talk about the tightness in the energy markets. What else LNG is clearly a position -- an area of strength, but what other end markets within TPS are you seeing particular areas of strength?

I mean we still see quite a bit of FPSO activity through this year. I think as the year goes on, and this is hard to kind of switch into because there's a lot of engineering work and assessment that goes upfront. I think both with the desire for more production and the focus on emissions efficiency starts to kind of show up. So the upgrades and efficiency, which plays more to some of our services business, continue to support the customers. We see a bit more dialogue than usual there. And then while I'd say from a revenue perspective, it's still out it's had a couple of years for it to be meaningful. You see certainly a lot more thought going up thinking around you're obviously going to spend a bit of a time to behind hydrogen. I say hydrogen, cleaning power and decarbonization. So carbon capture, whether that's utilization or whether it's sequestration, there's more understanding there, I'd say, of what that takes to piece together or the projects potentially in the short term start to make sense, where the regulatory approvals come in. I'd say those are the areas that we see.

Okay. My last kind of broader question before speaking about the topic of today would be hydrogen. Just any broader implications to TPS from the Russian Ukraine conflict?

I think the obvious one is really just the desire for an acceleration of projects. And most of those, I'd say, are North American. What does a class track project look like, what's really -- what can we really deliver? As I said, I think probably the long goal attempt is probably for at this point in time and getting everything there. So anyone who's got a different got a FERC approval to move, I think, fairly quickly at this point in time.

Well, great, great. Let's talk about hydrogen. Baker has been in the hydrogen market for over 50 years. It's something that's not new. But for the generalists on the line, can you talk about Baker's hydrogen offering in gas compression and gas turbines?

Definitely. So Arun, I mean when you mentioned for 50 years, I mean, that takes us back into the early days of compression, very much so hydrogen compression also, I'd say around the ammonia facilities as well, the process requirements around that, whether that's also been in sort of pure compression for storage or whether that's compression for transportation, both of those, we've played it for some time. We certainly have over 2,000 hydrogen compressors in operation today. All of that, though, you obviously recognize as being far more, if not far more, but all really on what has been a great hydrogen production. I know you wanted to talk a little bit about colors later on, we can get into that. And then really, the gas turbine side, the application -- combustion application of hydrogen, that has been very much around blending. What does blending look like? And then what's the move towards 100% hydrogen? And back in sort of 2007, 2008, we actually get the world's first fully hydrogen-powered gas turbine in Italy with Snam, and that continues to operate. So that really, so it was a foundation we understand, obviously, the material science around that, the combustion science around hydrogen, oil and gas turbine technology. And the way we kind of like to talk to customers about it is -- there's a bit of a fear that if you want to invest in a gas turbine technology today, whether that's for mechanical drive or electrical power, you're kind of locking into natural gas. And that's not the case. You can obviously go from natural gas to a natural gas hydrogen blend, and then we can take you on a path which gets you to 100% hydrogen combustion. So you're not locked into using methane for the next 20, 30, 40 years, if you buy gas turbine technology. And all of the gas turbine technology we have can deal with a blend today. In some cases, some of the gas turbine technology can clearly do very, very high blend and I'm talking sort of 80s, 90s and even 100%, so pure hydrogen combustion. And that's a technology road map that we feel very good that we can follow and extrude at any point in time when really a customer wants to take that next step and move forward. We -- we're doing that with a NovaLT 16 for a couple of customers who want to burn hydrogen 100% now. So that program is well and truly behind us in many respects. And then we can move obviously across the rest of the product line as we want to. On the compression side, very much around continuing to advance technology. So we brought out the H2 PRC, which is actually a high compression ratio compressor, modified for hydrogen application. We've had it in the market for some time. It has capital and operational advantages because you do more in 1 casing where normally you'd have to do it across 2 compressors. So it reduces footprint, it reduces capital costs, increases operational efficiency. So we've launched that, and we're doing that with their products.

Great. We will talk a little bit more about that Air Products. A relationship with , I think, is really, really interesting and important on a go-forward basis. Let's talk about one of the questions we get is what is the top line potential in production, transportation and the utilization phases of the hydrogen life cycle that you guys have described.

The first thing to think about is that if you just think of the market as it stands today for hydrogen beyond any of the other applications you think about how do you decarbonize that. So how do you move from gray hydrogen to blue, so whether that's capturing the carbon obviously from a steam methane reformation or whether that's actually doing something different to take methane across the hydrogen, which, again, we can talk about in a little bit, and then really the compression. So the way we think about it is turning the play for us in compression. There's a play for us potentially, certainly around carbon capture, whether that's for reuse or whether that's for sequestration. And obviously, with Baker for sequestration, you can think about capture either liquefaction, transportation, completion reinjection and really some of the reservoir concepts of how do you manage we cover that whole spectrum. So it makes us quite different from everybody else in that space. There's no one else who really joins all those dots and could provide with 1 or 2 partners really a turnkey solution. And then sticking with hydrogen, we also made some recent acquisitions that take us into much more of a hydrogen space with respect to hydrogen production technology, which is probably [indiscernible] not that I'm never excited talking about gas turbines and compressors, but the recent acquisition that we've made around technology on a corner is very exciting. I think it's very feasible way of bringing hydrogen into we were into multiple different facilities with a lot of the challenges that exists with respect to transportation of hydrogen.

Okay. And can you talk about the competitive environment, kind of today, who do you compete with in turbines compression technologies?

Compression is -- sorry, turbines are really -- you think of the main players, small gas turbine Solar, Siemens, obviously, as well in that space. Larger turbine, Siemens, Mitsubishi predominantly. And then compression wise, Siemens is there, Mitsubishi is there and MAN Turbo.

Okay, great. And let's talk about the kind of the end market for hydrogen today. What do you see is the market opportunity? Let's start with the turbine and power gen side?

So I think you've got to think about what is it you want to go use the hydrogen for and how -- and this is where I would make distinctions between sort of gray hydrogen, blue hydrogen and green hydrogen in reality. If you think about green hydrogen per se, you're using electricity to make hydrogen to make electricity. So it's a net loss across the whole system. So you would use green hydrogen maybe for energy storage, although there's multiple ways to think about energy storage or you would use it for hard-to-abate or hard-to-move industry. So where you need high heating applications, or where you want to obviously replace existing hydrogen as it stands today. For me, I think you look at gas turbine application around things like ammonia, ammonia facilities, where obviously hydrogen is already in high production, but it uses a lot of energy, so you can use that at point of source. Also around places where you think the projects we have with Air Products, both in Canada and in NEOM in Saudi. Again, you can use the hydrogen for on-site power generation. The interesting thing for me is if you then start thinking about if you wanted to use hydrogen broader, and that's -- and we're talking sort of blue -- for me, at this point in time, we're talking about still using methane, but taking the carbon out and to get to the hydrogen side of things. You can obviously go -- we've talked -- I think you probably know well about blue hydrogen steam methane reformation carbon capture. Now you tend to do that at scale in 1 or 2 locations, and you've got to think about shipping it. So you take it into a liquid organic carrier. So you take it to ammonia and then that's another process that's more energy you have to use. And then you have to think about how you take that back. So again, that's more energy. So net-net, across a cycle using quite a lot of energy to produce less. The alternative -- and also, if you think about hydrogen network, there's obviously a lot of focus around methane leakage and fugitive leakage in methane operation and to get the same quantity of energy down the pipe if you're going to go with hydrogen, you need to put the pressure up. Methane leaks, but hydrogen leaks even better. Smaller molecule has a tremendous ability to kind of find a leakage path and get out, plus obviously the issues that you know about with respect to material science and embrittlement. So there's a lot of cost to go into thinking about refitting out a network. For me, the players use the existing methane economy infrastructure that's there. So you liquefy or you transport by gas pipeline. You transport it, you regasify and you put it into your national distribution system. We know what that looks like. We know how that runs and that exists today. So it's capital is already deployed. And then you take something like an Ekona solution, which is a turquoise technology. So you're using pyrolysis to take the carbon out at the point of use. And the carbon comes out as a solid format. So you don't have the problem then of capturing the carbon and doing something with it. It's a solid form of carbon in the form of carbon black, which again can be reutilized into other things that goes into road surfaces to car tires, to electric ECBs, electronic circuit boards. And there's a lot of research going on to say, where else can you use it? What else can you do with that? How can you process it to use it elsewhere? If you take that step, you have an existing infrastructure, you have a technology which we believe will come in and split the cost between gray hydrogen and blue hydrogen as it stands today. So it's very competitive from an economics point of view against blue, but it's easily deployed by anyone who wants to get on the system and deploy a 40-foot container, we believe we'll be able to get a 40-foot container to do about 100 tons a day. So then you start getting into a stage of saying, well, I can start powering quite a lot of different facilities with 100 tons per day, more containers, you can go 100, 200 et cetera, et cetera or you make a bigger process. And that gets people into a hydrogen utilization at a lower cost point potentially than blue, certainly than green. We'll come back a little bit on whether current prices of hydrocarbons are and how that promotes green just now. But I think that starts to open the door for things like gas turbine production, electricity production, motor power, things like that. Beyond that, I think you see hydrogen starts to find its way into some of the transport sectors, whether that has an ammonia, shipping, for example, trucking, those areas come in. And then if you find that you get to a really good hydrogen application, you end up with compression stations, which obviously play for us, local smaller compression stations as well as large. I think gives you an alternative potentially for things that may be moving towards battery allocated. So battery electric vehicles, you move to fuel cell electric. And actually, for large commercial vehicles and trains, that starts to be quite a feasible solution potentially because you get energy density, you get ability to move a long way without necessarily having to stop in charge for long periods of time.

Lots of interesting kind of optionality for future uses of hydrogen. Is there any way to peg kind of what the size of the pie is today and what it could be? I'd like to use -- 2030 is always a good marker, but what is the opportunity here?

So you're talking about just over 1.7 million tons of hydrogen today, of gray hydrogen production. You're probably looking potentially 20 to 25 by 2030. 20 million to 25 million tons. So quite a substantial expansion if you think about it from that perspective.

Any way to frame that in dollar terms? Or is that difficult?

It's hard to kind of nail it all with that. Certainly, from my point of view of how we think about it, we obviously look at a range of technologies, what plays, we think about what we serve in a segment. But certainly, you're probably -- for us, in addressable market, sort of 25 billion to 30 billion by 2030.

Okay, great, great. Another question we've gotten from investors over the last few weeks is just how have higher oil and gas prices impacted the adoption rate of hydrogen? Is it accelerating? Is it -- what's your thoughts on that?

What is doing effectively is it narrows the gap on green hydrogen. Because if you think of all things you just talk about gray, blue, turquoise, pink, there's a variety of different technologies, but they all use a base of natural gas or they use a methane. The alternative obviously is using electrolysis, water, electricity and produce hydrogen. With certainly European energy price right now, you close that gap on what's the cost of a hydrocarbon-based hydrogen and a water-based pyrolysis -- sorry, electrolysis-based hydrogen. So as you can see -- you definitely see that. I think again, you probably go through and say what does it do? It displaces gray. And then it probably starts to do some other things. If you think about Europe, it will incentivize more renewable, so you'll go straight to the electron, so it will push more renewable energy into the grid. And I think the situation, obviously, from a European perspective with Ukraine and Russia is what does energy security look like? So back to the earlier comment, obviously, it pushes the North American projects in the short term. I think in the longer term, you probably see broader adoption on some of the alternative technologies to provide electricity.

Great, great. Rod, you've talked about some of the different colors of hydrogen. But again, quite a few generalists joining JPMorgan's Global Hydrogen Week. So for the generalists out there, I was wondering if you could kind of go through and give us kind of the roles of blue, green. We'll talk a little bit about the cost in a second, but just maybe give us a sense of all the different colors that you think are relevant today.

What I'll try and do is I'll try and give you a range as it used to be. If you remember -- I'll go ahead. I'll peg your gas price now. That -- from that gas price, you obviously extrapolate and work it out. But -- so when -- if you take us up kilowatt hour's worth of energy, so it's not electricity, correct? It's still a raw form of energy, so you're still going to convert it. A kilowatt hour of gas would have been about sort of just under $0.01 so 0.9 of $0.01 per kilowatt hour. Gray hydrogen would've been about 1.1, 1.2. So it's obviously more. But it's just the same as burning. If you think about it, it's the same as burning methane, you're letting all the carbon go. Blue hydrogen would have been pegged somewhere about $0.04 to $0.05 to capturing the carbon or taking that out and producing hydrogen. And then green would have been sort of around $0.10 to $0.15. So quite a wide range. Obviously, as the gas price -- and I go back to talking about Europe, is that gas price goes up. It pushes blue, it pushes gray, blue up the scale. So gray is usually steam methane reformed hydrogen. All the carbon goes to atmosphere. Blue same only you capture the carbon. Turquoise is either plasmolysis or pyrolysis and produces hydrogen but also a form of carbon -- solid form of carbon, carbon black, which today is about $1,000 a ton. Obviously, when you move to an economy that will be producing huge amounts of carbon black if you're doing pyrolysis or plasmolysis then than price would just collapse. You'd probably come down to somewhere between 10 and 100 tons. So it opens up other markets for black carbon, but it's another form of obviously, revenue for anyone who's in that space. Pink, just as you know. So pink is if you use nuclear power as your sort of electricity to basically drive your electrolyzer. So it's still -- basically, it's a renewable form. If you class nuclear as a renewable, it's a renewable form of hydrogen. And then green is where you use a renewable pure, what you'd recognize as a green and pure sort of renewable, whether that's solar, whether that's wind, whether that's hydro and you use that to drive electrolysis and produce hydrogen from splitting water. And that's really kind of probably the main ones that you need to worry about.

Okay, my obvious follow-up is what needs to happen for hydrogen to be more cost competitive with natural gas, coal, nuclear other forms of energy today?

There's 2 things that I think, you look at happening. One is obviously, what does carbon price projection look like? So is there a cost on carbon that drives basically a levelization between methane and hydrogen with the carbon captured? Or methane and green hydrogen if you're looking at electrolysis. As I said, if you end up looking at that, I think you actually see that the market hydrogen reduces because green hydrogen, going back to what I said before, you're using electricity. You won't necessarily want to use that to then produce more electricity because you actually are moving through the cycle. You'll only use it for energy storage. And you'll just see more deployment of renewable technology versus hydrogen. So the hydrogen market wouldn't grow as much in that kind of case. But I think you put a carbon tax on, you look at you look at the requirement for very dispatchable power or reliable energy where you can guarantee that you can switch it on and switch it off. That would drive, obviously, the technologies that do that. And then I think you start seeing obviously supply chain maturity, technology maturity that drives you down the curve. So we're still, with a lot of these technologies, in the earlier phases of technology readiness, and if you think about the -- both the solar PV and the wind and turbine industry, you go back 20 years, 30 years, they were really expensive. And you think of them now they've driven right down that cost curve, the supply chains are far more robust than they ever have been. They're professional industrial supply chains and you've got the cost out and still coming out. You will see the same with all of these technologies in both hydrogen and also, I'd say, in carbon capture. I think I've seen a variety of different stats quoted that the something like 35% to 45% of all the technology that we require to decarbonize has yet to be developed and matured. So it's quite a lot of work if you think about it. And -- the supply chain will gear up. Today, the supply chain is just not ready for it. So more projects more certainty. That will drive -- that will really drive the engagement in hydrogen and other clean technologies.

I believe last year, Rod, the company Baker booked around $250 million of backlog related to new energy opportunities of which we're focused on hydrogen today. Can you talk about what you're seeing related to hydrogen?

Well, clearly, we -- I think as you recognize the work we were doing with Air Products certainly around NEOM and in Canada. That's really around the technology you thought of us for either for the last 50 years or so in the last 30 years with compression and with gas turbine applications. So it's really compressing hydrogen, moving hydrogen or utilizing hydrogen on site for ride to those sides of the applications. So most of what you've seen from us from a revenue perspective today would be compression and gas turbine technology. The concept around Ekona is getting a lot of interest. I'd be honest with you, at this point in time, I would say I don't think we can take Ekona through TRL quick enough to get it from where it is around TRL 5, 6 today. We want to get it obviously up to 9 and get it deployed, fully deployed. We can't do that fast enough. The level of interest in that and also I'd say in the NET Power solution, the 2 of those, the phone kind of rings off the hoop with people wanting to know, when can we see it? When can we show them what it does? When can they buy it? Those are the kind of interest levels that we have right now because, again, the application space in the logic and rationale around the [ Latvian ] application space is very good.

Okay. Rod, let's talk a little bit about the collaboration with Air Products. I think this is the moment in time when you guys announced that press release when people -- you're investors noted that, wow, Baker is a real player in hydrogen. So just given the importance of that. But could you talk about the broader collaboration and then we could talk about some of the projects you're working on with them?

Yes, I mean I think you recognize we always had a relation with Air Products through the LNG side of the industry for a long time. And we work collaboratively for 30, 40 years now with them. I think the way we looked at it was, they had a plan to really go develop and accelerate new hydrogen technology and clean hydrogen technology in a number of projects. We had obviously the opportunity to bring really, I'd say, the compression and combustion technology with us to help accelerate some of those projects, help us accelerate some of those technologies and improve them in the marketplace. And really, what we're looking at is between us and a few of the customers, how do we demonstrate hydrogen, basically hydrogen production technology at scale or a hydrogen production solution at scale that helps accelerate the industry and brings clean hydrogen into the energy mix. So, I think, we're very aligned on that. We both see the same opportunity. We're early movers with respect to the solution. And we've really committed to work in a very, very open way from a technology perspective to make sure that we codevelop our respective technologies to ensure that we can make them work efficiently, effectively and cost effectively for our customers. So we'll drive into NEOM with them clearly and also really around the gas turbine application in Canada. We get from a lot of customers is where? Where have you done it? Where? Show me -- I hear you tell me you can do it, show me. And this obviously gives us both of us the opportunity to say, well, we can show you. We've done it here, and we've done it here. A lot of -- certainly, in the oil and gas space it won't be -- you have heard this before, but there's a race to be second. They like to see somebody else to take the leap and then everyone races to capitalize on what somebody else is showing them.

Okay, could you give us an update on both of those projects? And we get the probably the most questions about the NEOM project in Saudi.

Well, to be honest with you, Arun, I would actually defer because overall, Air Products are really obviously in the driving seat of the customer. From our point of view, technology-wise, the technology is ready. We're ready to go with it. The programs, both for our sort of manufacturability materials and the combustion science is there. It would be remiss of me to try and give you an overall project review or view because they're clearly covering much more of it and have a prime interface of the customer.

Fair enough. And then just any regional views, where are you seeing regionally or globally regions ramping production of hydrogen, turbos, power gen, et cetera?

I think -- I mean probably the areas that you think of where is there? Where is a tailwind, either from a government perspective, regulatory perspective and the sort of stars aligned from a technology and resource capability point of view. Europe is putting a lot of focus into hydrogen, same as North America, and then I'd say Australia. Those are the 3 sort of hotbeds as it stands right now outside of what you was that we've already talked about with Saudi and the NEOM project. So those would be the real areas where I think there's certainly a lot of activity looking at feasibilities. Germany has a plan to have about 30 gigawatts of green hydrogen utilization in the country in the next decade. So you can see, certainly from a European perspective, there's a focus to try and get hydrogen into the economy. And as I say, I think you look at North American gas price, if you look at some of the technology we've got today, hydrogen is a -- going into hydrogen with solid state carbon is actually quite a feasible way of dealing with a carbon problem potential for anyone who's trying to get a carbon reduction.

A couple of last questions, Rod, I appreciate your time. Can you talk about some of the key end markets for your customers in liquid hydrogen?

No, but I'd love for you -- I think you're really talking along the ammonia side per se. I think there's also an interesting area, and I'll come back on -- you call them renewables or circular fuels, e-fuels, synthetic fuels, maybe come back a little bit on that. I think the ammonia side, you see certainly in terms of transportation, shipping. You can definitely see that it would play into -- it can play into that. So you're looking at aqueous ammonia, so it's stable. You're not -- you don't have the problems that you think of with a volatile and explosive substance. So it actually means you can deploy it into sort of, I'd say, commercial and industrial transportation, not necessarily, obviously, into aviation, that's more likely to go a different way. But those are probably the main -- I'd say, the main markets at this point in time that I would expect it to land in. On the other side, utilizing hydrogen, green hydrogen, then creating synthetic fuel, methanol, ethanol, et cetera, is a potential way for things like aviation fuel, whether it's a blended aviation fuel or full aviation fuel, I think the underlying is over here, where I think you see hydrogen play and there's a number of projects today, we've just obviously signed up with one in H2 into synthetic fuel, which brings us together with Porsche in Latin America to look at that process.

Okay, great. Operator, can we go ahead and open up the line for Q&A, if you could prompt investors on how to ask a question?

[Operator Instructions] We have a question at the moment from Douglas.

Thanks very much for talking to us. I was listening to you a few minutes ago talking about the cost of the different colors of hydrogen and I noticed that an organization called the Global Green Hydrogen Organization, something like that. It came out with a standard last week talking about, call it, green if it's such a shared Scopes 1 and 2 with entry, with maximum 1 kilogram of CO2 equivalent per kilogram of hydrogen. And I just wondered if you off the top of your head, some of the blue projects you've looked at, you know what their metric might look like?

Sorry, I was on mute because for me, it was just -- it was faint at one point in breaking up. I didn't quite catch the last part of the question.

Sorry, everything is wrong here. Let me try again. So I think there's an organization called the Global Green Hydrogen Organization. As it came out with a standard last week, it says 1 kilogram of carbon CO2 equivalent per kilogram of hydrogen means if you could call it green hydrogen. And I just wondered whether you have a number for that intensity for some of the blue projects that you've looked at.

So for blue, you're looking at round about 85% -- 80%, 85% capture as it stands today. Turquoise will be slightly higher, in fact, quite a bit higher because you actually don't emit carbon and the process is slightly different. So it's much close to 100%. So it's still 1.5 plus any methane. It sounds like.

[Operator Instructions]

If there's no other questions, let me just go ahead and conclude with what about on the policy front, Rod, are you seeing anything -- in terms of governmental support that can make -- that could increase the adoption rate of hydrogen?

I mean just this week or actually last week, wasn't it that the EU came out looking at 330 billion of investment for a variety of technology and applications that would include some gas for LNG, but also includes renewable, it includes hydrogen as part of its energy security and the acceleration to get off of Russian gas. So things like that, there's a number of programs that are the EU -- predominantly, I would say, EU or U.S. from a technology point of view. So looking to invest from a grant and support point of view in Hysan Technology research. So those help. And then honestly, the biggest one that underpins all of this is just certainty, certainty around carbon emission. The cost of emitting carbon for everybody, what does that really mean? And ultimately, that will be the driver that will help people understand which technology they select and which path they select. Whether they go electric, whether they go hydrogen, whether they go carbon capture on their existing technology, those will be really defined based on an application by application, where they are geographically, what access they have to an energy source. You'll see that. I think that's the biggest driver to really those moving on. And at this point in time, that kind of really puts it into certainly North America, both America and Canada. Europe, Australia, probably the ones that you'd say are leading from that perspective with having clear policy and a mandate to increase the cost of carbon emission over a period of time that people can start modeling and thinking about.

Adam Ward, would you like to talk now? Please go ahead, Adam.

Yes, so I just wanted to sort of think a little about the HPRC compressor and sort of maybe understand what the revenue opportunity is for a 1 million-ton green hydrogen facility for kind of just that unit? And then sort of related, like how would you think about, I mean, given the cost savings for customers, how would you think about the gross margin of that relative to the existing turbomachinery business?

I mean I'd have to come back to you on it from what we look like. It's going to look similar to, sort of, FPSO. As compression technology there's multiple different ways in which they could choose to size it. But certainly, it differentiates. And I think it's not going to be $1 billion opportunity. It's probably going to be on something in that sort of size. It's going to be in the tens of millions to maybe $150 million. And then it really comes down to the value proposition for how it differentiates. And that really comes down to supporting infrastructure, footprint size, capital cost and then you can obviously work your pricing based on if you don't use that technology, you're going to have to use 2 compressors, 2 drives, 2 variable speeds drives. So you know the cost of doing something different and then you price differentially from that perspective.

Operator, do we have any other questions?

[Operator Instructions] Douglas would like to ask 1 more.

The EIA says the world needs 500 million tons of green hydrogen or blue, green hydrogen by 2050. I think other reports say 800 million, 1.4 billion. So what I'm wondering is how aggressive Baker Hughes wants to be in the opportunity. And it seems there's 2 ways to go and maybe it depends on the timing, right, of how you're positioning and the orders flow and that sort of thing, but it seems you maybe have a choice of going really aggressively to make sure you've got the best product, the lowest cost, the right manufacturing capacity, all that sort of thing and if demand or can you just wait at any point of time and flexibility to just wait?

So I think shorter-term play at this point in time so I'll give you kind of how I'm thinking about it. The hydrogen-based from methane today, I think, gives presuming that energy prices start to normalize as obviously production starts to ease some of the problems that there are today. If you think that hydrocarbon price is going to stay where it is now, certainly in Europe and stay like that for a long time. I think that promotes green even with the technology that's there today. If you assume obviously that hydrogen price or hydrocarbon prices back in the same range we expect. And obviously, you can see what it is today in the U.S. Then that's where you start to give out blue, turquoise type solutions to go forward with hydrogen. I think green hydrogen for us, then we look at what are the next-gen technologies. We know what electrolyzers look like. We know how that whole situation, look, what does the stat look like from the point of view of both profitability and from the point we're getting cost out and the economics of green hydrogen. I then think we look at some of the early stage technologies, and we'll take a bet on that for the future. And then probably not so popular with the green hydrogen community is, I think, actually, over the time frame of 2050, green hydrogen, the main competition for that is probably nuclear fusion because they're both in the same time frame.

Rod, on behalf of JPMorgan, we really appreciate you participating in hydrogen week this year and look forward to hopefully having you as another participating company next year, as Patrick and team continue it's been a great series. So again, thank you. And operator, let's go ahead and conclude the call.

Thanks, Arun.