Interview Jillian Evanko - President & CEO, Chart Industries
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We recently sat down with Jill Evanko, the President & CEO of Chart Industries to get her take on the current market for LNG Export & Hydrogen projects.
Jill will be a headline speaker at the Energy Projects Conference & Expo, this June 11-12 at the George R Brown Convention Center in Houston. More info at www.epcshow.com
Q: Can you tell us a bit about yourself, about Chart the company (your key divisions and services) and also your own history at the company?
A: I'm Jill Evanko, CEO and president of Chart Industries. I've been at the company for about eight years now. I started at Chart as the CFO of the company and then in early 2018 I became the CEO. Since then, we have continued to grow as a company focused on engineering design manufacturing of molecule-agnostic pieces and parts of a portfolio, as well as full solutions with process technologies. What that means is that we design and manufacture equipment and solutions for markets such as LNG, hydrogen, helium, carbon capture and water treatment, to name a few. Now we are a company of 11,700 team members around the world and we manufacture in over 64 locations globally. It's a wonderful business to have and there are great opportunities to continue to profitably grow.
Q: Chart is focused on key parts of the energy transition, including LNG, hydrogen and CCS. What do you see as the top opportunities and top challenges for Chart in the energy transition?
A: Energy is top of mind for everyone. No matter how you look at it, there's increasing need for energy, and that ranges anywhere from the perspective of energy security, energy access, to transitioning toward cleaner and greener options, as well as with macro trends that are driving things like artificial intelligence, which again, in turn, drive the need for energy. So, all things energy and energy transition are top of mind for us and our belief is that the energy transition is going to be encompassed by a hybrid of solutions – not just one or two answers, but multiple different ways that energy is going to be sourced around the world. A lot of that has to do with where you are, what stage of the energy transition you are in and also what access you have to existing infrastructure. Top opportunities range from the areas of true green – that's around hydrogen and we see green opportunities for infrastructure from production, storage and transport to end use for hydrogen. Certainly, that's starting to be top of mind globally, but it's still a very regional market. We see the opposite side too: the challenge of how you take something like hydrogen that's extremely regionalized right now and turn it into to a global supply and demand market. We also see the interconnection points to the oilfield – to oil and gas applications where there are things like carbon capture, utilization and storage that can support existing infrastructure and existing molecule generation and be able to also move this one or two steps on the energy transition scale. So, there are many, many opportunities and as an industry, we just have to continue to challenge ourselves to be more innovative and provide better combined solutions across the industry for these challenges.
Q: We want to talk about two of your key divisions, LNG and hydrogen. Focusing on LNG first, what are some of the most important LNG projects you’ve been involved with over the past decade?
A: We have been involved in multiple different LNG projects, and we think of LNG as ‘Big LNG’, so this would be LNG export facilities, small-scale and floating, which we've seen more and more of in the last half of a decade; LNG infrastructure, including things like fuelling stations, ISO containers and regas terminals; all the way through to what we're now starting to see, which is lifecycle services, repair and service on existing brownfield locations. There’s a great abundance of ways that we play in LNG. In terms of projects, we've had big projects and small projects and what I think is super important for the industry that we're seeing in LNG is around the movement to modular. And when we say that, it's the ability for operators to put multiple trains together – fewer, larger – and do so in a more cost-effective manner than the historical baseload facilities. We're really proud to participate with every one of our customers, and recently, over the last few years, with Cheniere for the Corpus Christi Stage 3 export facility. And just in the last few months, we announced our process technology being selected for the ExxonMobil Rovuma Mozambique project.
Q: There has been a strong upcycle in the LNG market over the past few years. Do you see that continuing over the coming decade?
A: We do. We anticipate that LNG will continue to be a really crucial part of the energy transition, as we've talked about, certainly from this perspective of cost and scale, and the fact that there is a global pricing mechanism, the availability of the infrastructure – all these things contribute to why the answer is yes across this. You can look at supply and demand and the projects that are coming online for production and supply and see that there's still a growing need on the demand side to meet the global gas requirements. All in all, we anticipate that we'll continue to see more projects get through FID. In the places that require regulatory approval we anticipate – in particular in the United States with the incoming administration – that LNG continues to play a crucial part in the energy story.
Q: Looking specifically at the US market, the pause on LNG export permits has slowed the market for project development over the past year. How have you felt that impact at Chart?
A: Surprisingly, we did not feel as dramatic an impact as you might have imagined. What we saw was some international projects fill in where those gaps were, on the United States side. And then in the States, some existing brownfields that were doing expansions or optimization projects contributed to what was still a very good year in LNG for us.
Q: With the new Trump administration, how do you see the pipeline of current projects changing over the coming years? Are you bullish on the outlook?
A: Yes, certainly for oil and gas – and LNG included in that – and I think just in general, on the overall environment toward energy policy and regulatory policy to support America being in a strong position to supply our allies, in particular with LNG.
Q: How do you balance the more favorable regulatory and permitting environment for LNG under a Trump administration with the prospect of higher tariffs on imports? How concerned are you about the potential impact of higher tariffs on the cost of your equipment and therefore the knock-on impact of much higher project costs?
A: What I would say is that it's hard to answer this question with any level of certainty until we know what this generic tariff commentary really means – the two sides of that coin. I think, as companies that operate around the world, we're all waiting to see what that really looks like and what that means, but also being ready for things that we saw even a couple of years ago, when the supply chain costs were very high, when there were challenges in freight and shipping and with the Red Sea conflict. Adaptability in the company and agility to respond to the global nature of the supply chain and the sourcing is something that's top of mind for us internally. I would say there’s more to follow on that answer once we see what the specifics are around this administration's plans.
Q: There is increasing push back to major energy projects from environmental groups and some local communities, as seen in the recent FERC permitting authorization of NextDecade’s Rio Grande project. How serious are these threats to major energy project development in the US, do you think? And what are the ways in which you are seeing owners / operators / project developers adapt to address these new challenges?
A: I would say that what we have seen in many of these communities is the fact that these projects actually bring jobs into the communities, and so that's something that I think is very important to keep top of mind as the various debates happen over the validity of the project itself and the impact on the environment. Also, when you think about ESG, a big portion of that is job creation in local communities. These projects bring that to the table. I also think that we've seen many responsible operators not only bring jobs to the communities, but also interact with the communities to attempt to understand what the potential ramifications are and how they can further support the community outreach associated with them. So far, I would say we haven't seen a meaningful direct impact on the projects themselves from this type of pushback, but certainly it's something that every operator has to think through. Also, in addition to the community outreach and the job side of things, we've seen many of the operators look to really understand what that GHG emission tracking and requirement and entire life cycle is and the scope of that. These operators are spending a lot of money to ensure that they're doing the best they can for not only the reporting requirement, but also the reduction of GHG emissions where possible in the value chain from the upstream all the way through to the export. So, there’s plenty of activity underway, but I think that this is – like many things – an ongoing debate over the merits of where on the energy transition scale projects such as LNG export fall.
Q: What are some of the key solutions Chart is developing in order to address the challenge of emission reductions and energy efficiency?
A: We are working with customers to achieve their energy efficiency and emission reductions targets. And you see that through much of our equipment being utilized, whether that's our dosing equipment that doses molecules into bottles or plastic bottling and cuts down the PET that's used in that process – we're very proud of helping our customers with things like that – or projects that are green hydrogen-oriented and carbon capture-oriented and so on. The one side of that coin is what we do to help our customers achieve those goals, and then the other side is what we do for ourselves. We also have our own targets with respect to GHG emission reductions and goals that we have out in the public domain and through multiple different actions internally. We have a very specific roadmap that ranges from us working with our suppliers or supplier compliance with our requirements, through to things like making our factories where we manufacture these pieces and parts and equipment be much more environmentally friendly. We've had projects where we've installed solar panels at our factories. We've done LED lighting, specific lighting projects and we also work closely with our communities in projects like recycling of used material.
Q: Cost escalation and long lead times for key equipment have been a major challenge for project developers over the past few years. How are you seeing cost escalation and supply chain constraints currently at Chart? And in what ways have you and your team been working to address these challenges?
A: I would say, first of all, that this is one of those double-edged sword questions. The long lead time challenges that we have in certain product categories are also a reflection of strong demand, but the bottom line is that we still have good room to improve on our lead times and on increasing our throughput. I personally would say, within our own control and our own shops, we have opportunity to continue to improve that, and that's in partnership with our suppliers and our supply chain around ensuring that it's a mutually beneficial relationship. So that we're somebody that is truly a partner to the suppliers versus just a customer. So that it’s less of a transactional relationship and more of a 'Hey, if we get the work, then you will also get more work'. And in turn, we both have to deliver on time to make this project a success. That's harder and harder as projects get longer and timing shifts happen and things like that. But in my opinion, this is about having good partnerships in the supply chain, in the value chain, all the way through, so that over time, you can get through hiccups together, and it's not just 'Oh, it's your fault, okay, move on' and it's transactional, but rather: 'Let's work on this, let's make it right, let's either share in the pain or share in the joy'. Over time, this is a very trusted relationship, and that's what we really are working to achieve with our critical partners.
Q: How do you see growth of the LNG export industry globally? Do you see the demand there for the growth projects in the US, Africa, the Middle East, etc.?
A: I think we're seeing it become a much more global market. I think in particular to Chart Industries, we've seen the uptake of our modular process technology outside of just the US Gulf Coast, and so in turn, we're seeing many more projects internationally. I think there's certainly been strong momentum for floating LNG and the ability to have that flexibility on a platform and offshore. I think there are elements as to why that is for operators, but that's definitely become a non-North American part of production for LNG. And we've seen a couple of the larger international projects’ incremental or sequential phases look to move to modular, to give them that flexibility that we talked about. So, I think it's going to be very balanced, in my opinion, where, certainly the US Gulf Coast goes through its next wave, goes through this resurrection from coming out of the LNG pause, while you're also seeing projects that have long been announced internationally start to take foothold and then pop-ups on a small scale and floating all happening together at the same time. I'm pretty bullish on this being a very globalized next phase, and I think that's actually really good for the industry, for pricing and for availability. I love the position of LNG right now, but as we all know, easy come, easy go, so tomorrow it could be a different answer. But as a whole, I think the globe is generally embracing LNG as part of where we sit today in this transition.
Q: Moving on to hydrogen, what are some of the most important hydrogen production projects you have been or are currently involved in?
A: I think hydrogen – just like LNG – goes into favor, and then out of favor and into favor again. But what I can say is that we have seen a really nice evolution in the hydrogen industry and ecosystem, from maybe what I would call unrealistic dreaming to very realistic and achievable projects. We serve both gaseous and liquid hydrogen. What I would say we've seen of late on the production side is more movement toward liquefaction. There are multiple reasons for that, but I think generally it's reflective of scale in the desire to have more production and more output in these facilities. We have multiple hydrogen liquefaction projects that are underway, mainly in North America. And just this year, we have had a very strong year in European gaseous equipment, so that's mainly on the compression side for green industrial applications. So, we're seeing a very broad geographic mix in terms of what's coming into the backlog and into the order book, but production-wise, it’s mainly liquefaction and liquefiers. And 15 tons per day or 30 tons per day are the sweet spot sizes that that we at Chart have seen.
Q: Some of the initial hype in hydrogen seems to have calmed somewhat over the past year. Where do you see the market for major hydrogen production projects in the US at the moment?
A: I think there's good and bad as always. It's always fun to ride the upswing of euphoria for any such thing that one is involved in. But then what goes up, must come down – that’s what they say – but I actually think it's been constructive for those players that are in for the long haul in the hydrogen ecosystem. Because for folks like us that serve with the equipment, it's very difficult at times to figure out whose project is real and whose project is not real. So, having this pragmatism fall upon the industry has been, I think, helpful to those who have a real project with real financing and real land, and have a plan. That may have come at the cost of some of these dreams, but as those who are able to progress these projects forward, they're going to get critical mass. Then from there, the infrastructure will get built, in my opinion, and in turn, you get to the end use, then that starts to build upon itself and it becomes more than just a demonstration project. And that's what we need. That's what the industry needs to get away from this one-off project and get into what is more connected infrastructure and a connected system. My belief is that in the United States, you're going to see that happen. I said this pre-election – regardless of the administration, I think the way that all of these molecule ecosystems behave is that, even with public sector support over time, they have to prove that the industry itself can be self-sustaining. And I think that has been given a kickstart by some of the pragmatism coming into play in the last 18 months here. My parting comment on the US, in particular on hydrogen, is, the IRA – the Inflation Reduction Act – was announced in August of 2022 and here we sit at the end of 2024 and there's still a lack of clarity on aspects of the 45V in particular. And if you're saying something is going to slow down further, I'm not sure that that's even something that can be contemplated, because there are so many projects that have been waiting for two and a half years to see what the rules flush out as. I think we've been living that already, and perhaps there's the opposite effect, where – with clarity – some of these projects are able to move ahead that haven't been able to move ahead already.
Q: How do you see the new administration impacting the current momentum in the hydrogen industry?
A: In general, I think that the number one thing people are waiting for is clarity on the credit systems, the funding systems, the loan systems and so on. And once that clarity arises, then the industry can move ahead one way or the other. I think it's just a general feeling in American energy that certainty and consistency in the application of whatever it is in the regulatory environment is what we've been missing. And as Americans, I think we're looking for that certainty and clarity and consistency so that this wood saw – or this waiting effect – can go away or can at least be mitigated. That would be my overarching answer to all things US energy policy.
Q: How has the demand side of hydrogen developed? Where do you see the major demand coming from in terms of industries? Does that demand support the pipeline of projects waiting for FID?
A: The demand side is super interesting as a whole. I think what we've seen predominantly in the last few years has been production and storage and transport. And so now, I think if you ask people around the public sector, people's view would be that the public sector or the government stimulus needs to also support the demand side, not just the supply side. That's something that certainly gets a lot of attention but has yet to get traction on what that demand-side stimulus could look like. Now, setting stimulus aside, what we see primarily is power applications. We've seen some heavy-duty industrial applications looking to be users of green hydrogen, or of hydrogen as a whole. That ranges from Class 8 heavy-duty trucks up in terms of size. And most recently, I've been pleased to see the marine industry looking at liquid hydrogen as a whole, whether that's from onshore fuelling to actual fuelling of the ships to the transport between locations. So, I think heavy-duty transport and power-to-X are the two that are the most probable and realistic from the demand side.
Q: What was behind your decision to acquire the Howden business? And how has the business been performing since then?
A: The Howden business is very complementary to the Chart legacy business in that when we talk about mission-critical manufacturing of key parts of the solution – whether it's for hydrogen or whether it's for water treatment or carbon capture. Howden brought to Chart those missing pieces that we didn't have in the portfolio, in particular special decompression and aeration and blowers, to name a few, and some specialty fans. Having all the mission-critical equipment in-house to be able to manufacture and provide into these projects is something that we've been very blessed with over the last 18 months. The other piece of the Howden business that has been a real gem has been the aftermarket service and repair piece. By having Howden's expertise in that aftermarket in the broad combined Chart portfolio, we've been able to bring the aftermarket service repair component of our business to above 30% of our total revenues. When I talk about the full service, it's from engineering all the way through to service and repair, and that really gives our customers the ability to choose a full solution or a piece or part from the menu that we offer.
Q: What do you think is required in order to create a self-sustaining hydrogen industry?
A: I think, more than anything, if there is a way for multiple governments to sit down and talk about how we can work together for global pricing, global safety requirements and global certifications, so that we're not building 100 different regional models that have no interconnection points. And so, when we talk about public sector support of the private sector, I think to date, it's heavily been oriented to the idea of stimulus or credit systems or taxing systems, versus collaboration between countries on how to make a true market for hydrogen.
Jill will be a headline speaker at the Energy Projects Conference & Expo, this June 11-12 at the George R Brown Convention Center in Houston. More info at www.epcshow.com