Golar LNG inks 20-year charter deal for FLNG unit

The FLNG Hilli’s present charter, with the unit working the Kribi field offshore Cameroon, expires in 2026. The charter to a partnership of Perenco, an independent, with Cameroon’s Société Nationale des Hydrocarbures (SNH) began in 2018 following Hilli’s conversion into an FLNG, the industry’s first, at the Keppel Shipyard, now under the Seatrium umbrella since mid-2023.

The FLNG Hilli is a converted 122,000 cu metres LNG carrier with spherical tanks, small by today’s standards, built by Moss Rosenberg in the mid-1970s

In the newly announced deal, the subject of much speculation, Golar LNG will join forces with Pan American Energy in production of gas from fields linked to Argentina’s Neuquina Basin. American Energy was described by Stifel shares analyst Ben Nolan as “a decent-sized player in the region [with] diversified operations with projects in Argentina, Bolivia, Mexico, Brazil, Uruguay, and Paraguay.”

The contract, with gas exports expected to commence in 2027, includes taking FLNG Hilli on a 20-year charter. Importantly, GLNG’s announcement describing the deal says that: “Golar has flexibility to consider a swap alternative for another suitable Golar FLNG unit.”

Analyst Chris Robertson, at Deutsche Bank, described the announcement as: “a years-in-the-making positive catalyst event for Golar”. He writes further: “Investors have been concerned with what would happen to the Hilli once it rolled off its current contract in mid-2026 and today's news answers that question in a big (twenty year) way.”

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There could be upsides way beyond the 20-year deal, as announced. Stifel’s Nolan, who had anticipated that Golar might make a charter deal with Argentina’s YPF, but saying the Pan American Energy…”while not a national oil company, it is still a good option for Golar in the region, went through detailed maths surrounding the deal, where the arrangement gives GLNG exposure to the price of the LNG, explained in his notes to clients that: “Golar has the flexibility to swap the unit for another vessel, which would be an MK II vessel. It is our understanding that the company would be able to use the same fixed and variable tolls for a vessel 45% larger, which should drive EBITDA well north of $500 million.”

Deutsche Bank’s Robertson delves into the timing of potential vessel conversions, writing that: “assuming the first MK II vessel is ordered this summer, it takes three years for conversion, two months to sail, and up to six months to commission, this would place a MK II FLNG into commercial operations by 1H28. Should a second MK II vessel be ordered this summer, we believe it would take several months longer to delivery based on the need to procure long-lead equipment. As such, we believe a second MK II FLNG asset could potentially be fully commissioned by 2H28 if placed on order in the coming weeks.”

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Golar LNG’s fleet presently includes the 2004-Kawasaki Heavy Industries built, 148,000 cu metres LNG Fuji, acquired in 2023 from TMS Cardiff Gas, and its “Fleet” listing describes it as a vessel with potential for future conversion into an FLNG.

Potentially, other vessels could be purchased for conversion. Nolan, in his analysis, suggests that: “We assume the Mk II slots into this contract in Argentina in 2027 instead of the Hilli. As a result, we expect the company to re-market the FLNG Hilli to another counterparty, likely ending up in Africa (probably Congo with Trident but possibly Nigeria).”