Ghazal Izadi: Welcome to Power Shift. We are very honored to have Martin Craighead, former chairman and CEO of Baker Hughes, one of the world’s leading energy technology companies, Martin, welcome to power shift.
Martin Craighead: Thanks for having me
Ghazal: so, Martin, do you want to give us a little bit about your background?
Martin:30 some years with Baker Hughes entire career, petroleum engineer, out of Penn State, MBA out of Vanderbilt. 15 years International. Final parts of the career in Houston. And as you mentioned, started off as an engineer in R and D, and I was fortunate enough to progress throughout the entire company and retired in 2017
Ghazal: I think I would like to ask you a question. You were dealing with technology development for many years at Baker Hughes, from drilling to completion to production enhancement, reservoir management. Why do you think the geothermal time is now? Or my question, is it now? What are the skill sets and technology we can adopt and transform for this different type of energy extraction solution?
Martin: That’s a great question and one of the reasons I joined the board of XGS was the time for geothermal is now, particularly with the technology that XGS provides. But putting that aside, because I’m sure we’ll talk about that a little later, the technology and skills within the oil and gas industry translate almost perfectly to geothermal. It’s reservoir evaluation looking for and measuring and delineating for heat versus hydrocarbon. But the principles, as you well know, of geology, geophysics, Petrophysics, are all equally important in geothermal and certainly, the technology evolution over the last 20 years, as the oil and gas industry progressed to more hostile subsurface environments, particularly around temperature or difficult drilling, have made the search for geothermal, I wouldn’t say simple, but far easier than it would have been. So, if you if you put together the reservoir characterization capacity of the industry today, and you couple that with the drilling technology and completion technology, then the day for geothermal, particularly with the backdrop of the desire for the world to have clean 24-hour energy, there’s really no other source. Certainly not in the fossil fuel side. And the renewables that we see today that have scaled, particularly solar and to some degree, wind, you know, have a real disadvantage when it comes to base load capacity capability. So, I think the prospects for geothermal, frankly, as we sit here today, are as good as I ever have seen them, and will rival what we’ve ever seen in terms of the 30 years I spent in the fossil fuel industry.
Ghazal: So Baker Hughes — they were working in this segment for 40 years, right? And you were leading this effort. But what is the shift you see these past two, three years? Right, in terms of geothermal technologies. We call it next generation. So how is going to shift the market from very specific geographical location, like Iceland, New Zealand, some part of the world that is a volcanic area with a lot of subsurface water to really unlock the potential globally, when we know the heat can be extract and convert to power or for other application anywhere in the world.
Martin: So the one thing that geothermal and I have seen in my career, I’ve seen this a couple of cases where certain technologies are prematurely hyped or exaggerated before they’re really ready. And to some degree, geothermal suffers from this, given the fact that it could be such a tremendous resource for the world, I think there has been a tendency over the last 20 years, at times, for certain parties to have exaggerated it. As a result, it has to overcome some skepticism now, which is somewhat unfair, nevertheless. And the reason that that skepticism is there is because it was it was it was never able to scale in an economic fashion because of the need for water. And the great element of XGS is the ability to extract, produce heat and subsequently power in a completely closed loop, non-aqueous, no need for water, which is distinctly unique to XGS. So, if you take away the need for water, then the scalability of it moves well beyond the traditional hydro geothermal areas like New Zealand or Iceland. And back to your original question. That’s what I saw in the opportunity set. Why I joined the board for XGS.
Ghazal: You touched on scalability part. So, let’s talk about this big challenge that geothermal face, which everybody called when to scale, how to scale and how fast we scale, right? So, we know that there is a lot of learning from oil and gas through drilling and really cost curve and cost reduction through more drilling. So how do you see geothermal needs to move toward this cost reduction curve, and that is really helped to scale up in more economically viable way. So, what is your thought on that?
Martin: As I mentioned, the technology is completely transferable from oil and gas to geothermal, we will reach a tipping point in the geothermal industry, fast, meaning that we’ve already drilled our first world and are happy with the results. You can see just in a small company of our size, the learnings, and the ability now to transfer that set of learnings to our next well and subsequently. But as our technology migrates from ourself to a customer community, then the pickup, and again, because it’s a tried and true technology from oil and gas, the scale will be rapid, and the fact underlying it again, that it can be done in areas that are more, whether it’s subsurface or On the surface, more receptive to a drilling environment is hot rocks everywhere. 90% of those rocks are not associated with water. So that opens up the playground for XGS because of its technology. And so, I do think that it’s going to, I wouldn’t say explosive, but I think the pickup rate will be rapid, because the wells would we are drilling. You know, we talk a lot about the technology that’s in oil and gas, but honestly, I have yet to see an environment in geothermal that is anywhere close to some of the difficult environments we’ve drilled in oil and gas. So, it’s, it’s not going to be. I mean, we all know that that drilling can be, have, have, you know, unexpected risks, but on the surface, and just in general, the portfolio of the opportunity set that that we’re looking at, that you and your team have developed from a resource is not a complicated drilling or completion environment, by no stretch of the imagination, compared to the wells that you know we drilled for our customers in oil and gas. So, it’s reasonable to assume that our ability to go and putting whether the reentries or drill new wells is going to be straightforward, and then again, with in the backdrop of the regulatory and political environment of moving to renewables and reducing the need for fossil fuels is, is fuel again, that will accelerate the scale.
Ghazal: So that is exactly where I’m going now. We have different or various stakeholders right there is an EFP, companies that they know how to scale, how to make the project financeable, and project management. They have service companies that they are more bringing into technology for execution at the scale and workforce. What is your suggestion in term, do you see that those are the key driver for the future of the geothermal to scale up quickly.
Martin: Yes, I do. I do. And let’s look at both of those for an oil and gas operator. They’re resource extraction professionals. We’re substituting heat for oil and gas or for fossil fuel. In many ways, it’s simpler. Don’t to worry about fluids, migration, disposal issues, environmental issues, but certainly the project management, as you said, the project finance, the subsurface expertise the oil and gas companies have, particularly in specific basins, all apply to geothermal and easily transferable, and I envision where the world’s oil and gas companies, whether they be state owned, whether they be independent operators or integrated operators, will begin to build subsurface expertise, as they have in oil and gas, and if you will have intellectual property around various basins, and I think you could argue, particularly based on the work your team has done so far, that there may be a broader, bigger opportunity set for geothermal for them than there is an oil and gas simply because there’s more hot rocks around the world than there are necessarily economically viable oil and gas place. So, it’s a perfect world for it’s their same business model, and it rapidly moves them into the renewable world, versus an oil company owning a wind farm, which is a very different business, or a solar farm, right? I mean, we understand why they’re doing it, but I think if I was sitting in an oil and gas company boardroom, if I had the opportunity to essentially replay my current business playbook over and over again, but with geothermal versus investing in a wind farm, I think certainly the risk profile is I feel more comfortable because That’s what my company does and is good at I was to the service company. I could see where XGS is technology, particularly the material sciences that we’ve come up with that allow for the heat harvesting without water, is something that an oil and gas service company could very much embrace. And as you know, and a lot of your listeners know, the actual sometimes target acquisition in terms of the resource as well as the subsurface mapping, well design, eventual drilling and well construction completions, production is what an oil and gas service company does on behalf of its customers, and again, whether at Baker Hughes, we were drilling for oil and gas or heat, really made no difference in the task at hand. So and you know, so I see that, that, you know, those two players, if you will, or two SEC sectors of the industry being well, very well positioned and in full alignment with where geothermal was going. And then, of course, you do have potentially a third player in this which would be your power generation company. And given the 24 hour base load capacity of geothermal, it’s relatively small footprint from resource to power in geothermal is far too far straighter line and a shorter line, if you will, than the requirements around oil production, transportation, refining and distribution. That’s a that’s a world that is requires a lot of capital, a lot of different expertise, a lot of regulatory and in today’s environment, meets a lot of resistance. So, I could see where utilities or power companies could also migrate into the space, and, you know, be jockeying for land positions around data centers or around, you know, future sites that require a high, higher, high withdrawal of power or electricity
Ghazal: So you hit on that this off taker could be from the utility, or even a hyperscaler for data centers. So, these are all the universe that could be a potential customer, right, or a leader of this segment. That’s exactly right. My last question before we wrap up, I think there’s a lot of question from the young generation that they are in the petroleum engineering department, and they want to see, okay, what is the future, how they can fit into geothermal Do you have any recommendation or comments for the younger generation that they are choosing to come to this energy segment.
Martin: Well, I think it’s like we said, you know, if I was to say the perfect skill set for the world of geothermal is still a petroleum engineer or a geologist or geophysicist, because it’s a understanding of the subsurface earth, and the skill set that is learned through years of oil and gas perfectly applies. But I would you know, having lived a wonderful life and career in oil and gas, there’s no denying the fact that the world’s appetite for fossil fuels is waning and slowly being substituted for renewables, and putting aside the politics, it’s not a bad thing. And while there always will be cycles in the oil and gas ups and downs for me, I could not genuinely argue that the long-term trend for oil and gas is Anything but down doesn’t mean it won’t be a major, important industry. Doesn’t mean it won’t be great place to work or a career to have, but if I was to do it again, I want to be in a world where the underlying industry is growing, not shrinking, because it provides a broader, more exciting opportunity set. And I think it would be hard to argue that oil and gas or fossil fuel industry in general, is on a long-term growth trend. I mean, that’s just not renewable, yes, and geothermal has the unique attributes of having 24-hour base load capacity that no other renewable I’m aware of other than nuclear has. So, you know, I told somebody recently, I think oil and gas industry will be like the mining industry. When I joined oil and gas nearly 35 years ago, or 40 years ago, mining was on a decline, and for the last 40 years, it’s been on a decline. It’s still a big, important industry, but I’m glad I didn’t spend 40 years in the mining in fact, my first desire was to be a mining engineer, and fortunately, through the advice of advisors and and and so forth. I moved in petroleum engineering because it was for the last 40 years, a growth industry of the last 30 years. I don’t see that for the next 30 years. But for a young person who who likes the let’s say what the oil and gas industry has to offer in terms of its globality in terms of its saturation of technology, in terms of its scale, in terms of capital and risk and its importance in the world, then I would certainly look at the geothermal side. Because it’s got everything. It’s got all the good things of oil and gas, and has probably a granted, it’s a tiny industry at this stage, but I would say 10 years from now, it’s not going to be great.
Ghazal: Martin, thank you so much. It was an honor to have you here and sharing your insight. Thank you. This is power shift. Please subscribe our program, and we are coming with new episode to talking with leaders, influentials around the energy, energy future. Thank you.
