On May 2, 2025, Golar LNG Limited ("Golar") announced the Final Investment Decision (FID) and fulfillment of all conditions precedent for the 20-year re-deployment charter of the FLNG Hilli Episeyo ("FLNG Hilli"), according to the company's release.
The vessel will be chartered to Southern Energy S.A. ("SESA"), offshore Argentina. Additionally, Golar and SESA have signed definitive agreements for a 20-year charter for the MKII FLNG, currently under conversion at CIMC Raffles shipyard in Yantai, China.
The MKII FLNG charter remains subject to FID and the same regulatory approvals as granted to the FLNG Hilli project, expected within 2025.
Key commercial terms for the respective 20-year charter agreements include:
-FLNG Hilli: Nameplate capacity of 2.45 million tonnes per annum (MTPA), expected contract start-up in 2027, net charter hire to Golar of US$285 million per year, plus a commodity-linked tariff component of 25% of Free on Board (FOB) prices in excess of US$8 per million British thermal units (mmbtu).
-MKII FLNG: Nameplate capacity of 3.5 MTPA, expected contract start-up in 2028, net charter hire to Golar of US$400 million per year, plus a commodity-linked tariff component of 25% of FOB prices in excess of US$8/mmbtu.
The two FLNG agreements are expected to add US$13.7 billion in earnings backlog to Golar over 20 years, before adjustments (based on US Consumer Price Index) to the charter hire and before commodity-linked tariff upside. For every US$1/mmbtu above the US$8/mmbtu threshold, the total upside for Golar will be approximately US$100 million when both FLNGs are in operation. Subject to a 3-year notice and payment of a fee, SESA may reduce the term of the agreement to 12 years for the FLNG Hilli and to 15 years for the MKII FLNG.
The commodity-linked tariff component is upside oriented. Golar will receive 25% of realized FOB prices above a threshold of US$8/mmbtu, with no cap to the upside for gas prices. Golar has also agreed to a mechanism where the charter hire can be partially reduced for FOB prices below US$7.5/mmbtu down to a floor of US$6/mmbtu. Under this mechanism, the maximum accumulated discount over the life of both contracts has a cap of US$210 million, and any outstanding discounted charter hire amounts will be repaid through an additional upside sharing if FOB prices return to levels above US$7.5/mmbtu. Golar is not exposed to further downside in the commodity-linked FLNG charter mechanism.
SESA is a company formed to enable LNG exports from Argentina. SESA is owned by a consortium of leading Argentinian gas producers including Pan American Energy (30%), YPF (25%), Pampa Energía (20%), Harbour Energy (15%), and Golar (10%). The gas producers have committed to supply their pro-rata share of natural gas to the FLNGs under Gas Sales Agreements at a fixed price per mmbtu before adjustments (based on US-CPI). Golar’s 10% shareholding in SESA provides additional commodity exposure.
The project has received the full support of the National and Provincial Governments in Argentina, which granted all necessary approvals including:
-The first-ever unrestricted 30-year LNG export authorization in Argentina.
-Qualification for the Incentive Regime for Large Investments ("RIGI").
-Provincial approval by the province of Río Negro for the offshore and onshore Environmental Impact Assessments for FLNG Hilli.
The FLNGs will be located in close proximity to each other, offshore in the Gulf of San Matías in the province of Río Negro, Argentina. The vessels will monetize gas from the Vaca Muerta formation, the world’s second-largest shale gas resource, located onshore in the province of Neuquén, Argentina. FLNG Hilli will initially utilize spare volumes from the existing pipeline network. SESA intends to facilitate the construction of a dedicated pipeline from Vaca Muerta to the Gulf of San Matías to serve gas supply to the FLNGs. The project expects to benefit from significant operational efficiencies and synergies from two FLNGs in the same area.
Golar LNG has a 79-year history pioneering maritime LNG infrastructure, including the world's first Floating LNG liquefaction terminal (FLNG) and Floating Storage and Regasification Unit (FSRU) projects based on the conversion of existing LNG carriers.