- Golar LNG (GLNG, Financial) secures $13.7 billion in earnings backlog with 20-year FLNG contracts in Argentina.
- Significant revenue from annual charters: $285 million for FLNG Hilli, $400 million for MKII FLNG.
- Contracts include a 25% commodity-linked tariff for prices above $8/mmbtu, with potential significant upside.
Golar LNG Limited (GLNG) has finalized two transformative 20-year Floating Liquefied Natural Gas (FLNG) charter agreements in Argentina, which are set to significantly enhance the company's financial trajectory. These agreements mark one of the world's largest FLNG development projects, with a combined nameplate capacity of 5.95 million tonnes per annum (MTPA).
The first agreement involves the deployment of FLNG Hilli, a vessel with 2.45 MTPA capacity, expected to start operations in 2027. This contract will generate an annual charter hire of $285 million. The second agreement pertains to the MKII FLNG, a 3.5 MTPA capacity vessel set to begin operations in 2028 with a yearly charter hire of $400 million.
A notable feature of the contracts is the inclusion of a commodity-linked tariff. Golar will receive 25% of Free on Board (FOB) prices for liquefied natural gas above $8 per million British thermal units (mmbtu), offering substantial potential for additional revenue.
The FLNG projects in Argentina will monetize natural gas from the Vaca Muerta formation, the world's second-largest shale gas resource. Both FLNG units will be strategically positioned in the Gulf of San Matias, allowing for operational efficiencies.
The charter agreements also provide downside protection, with the ability to adjust charter hire if FOB prices fall below $7.5/mmbtu, down to a floor of $6/mmbtu. This mechanism includes a maximum accumulated discount cap of $210 million over the contracts' life, with repayments required when prices recover.
Golar holds a 10% stake in Southern Energy S.A. (SESA), a consortium tasked with managing LNG exports from Argentina, which includes major partners such as Pan American Energy, YPF, Pampa Energia, and Harbour Energy. This strategic alignment ensures a robust supply chain and infrastructure support, bolstered by comprehensive governmental backing, including a 30-year unrestricted LNG export authorization.
