BELIZE CITY, BELIZE (By Aaron Simonsky, Energy Analytics Institute, 2.May.2025, Words: 757) — Golar LNG Limited (GLNG) announced a final investment decision (FID) and fulfillment of all conditions precedent for the 20-year re-deployment charter of the FLNG Hilli Episeyo, first announced on 5 Jul. 2024.
The 2.45 million tonnes per annum (MTPA) nameplate capacity FLNG Hilli will be chartered to Southern Energy S.A. (SESA), and located offshore Argentina.
The vessel contract is expected to commence in 2027. The net charter hire to Golar will be for $285mn per year, plus a commodity linked tariff component of 25% of free on board (FOB) prices in excess of $8/mmbtu, Golar announced on 2 May 2025 in an official statement.
Additionally, Golar and SESA signed definitive agreements for a 20-year charter for the MKII FLNG, currently under conversion at CIMC Raffles shipyard in Yantai, China.
Importantly, the MKII FLNG charter remains subject to FID and the same regulatory approvals as granted to the FLNG Hilli project, expected within 2025.
The contract for the 3.5 MTPA nameplate capacity MKII FLNG is expected to start-up in 2028. The net charter hire to Golar will be for $400mn per year, plus a commodity linked tariff component of 25% of FOB prices in excess of $8/MMbtu.
Both FLNGs will be located in Argentina’s Río Negro province.
And, both FLNG agreements are expected to add $13.7bn in earnings backlog to Golar over 20 years, before adjustments (based on US-CPI) to the charter hire and before commodity linked tariff upside.
“The vast resources of the Vaca Muerta formation will provide the LNG market with a reliable long-term source of attractive LNG supplies, and a significant contribution to Argentina.” Golar CEO Karl Fredrik Staubo said in the statement. “For Golar, the project adds robust earnings backlog, attractive commodity upside potential in the FLNG tariff and strong partner alignment through our shareholding in SESA.”
Golar on total upside
Golar said that for every $1/MMbtu above the $8/MMbtu that its total upside will be $100mn 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, according to Golar.
The commodity linked tariff component is upside oriented. Golar will make 25% of realized FOB prices above a threshold of $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 $7.5/MMbtu down to a floor of $6/MMbtu.
Under this mechanism, the maximum accumulated discount over the life of both contracts has a cap of $210mn, and any outstanding discounted charter hire amounts will be repaid through an additional upside sharing if FOB prices return to levels above $7.5/MMbtu. Golar is not exposed to further downside in the commodity linked FLNG charter mechanism, the company said.
SESA and Argentina LNG
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% WI), YPF (25% WI), Pampa Energia (20% WI) and Harbour Energy (15% WI), as well as Golar (10% WI).
The gas producers have committed to supply their pro-rata share of natural gas to the FLNGs under gas sales agreements (GSA) 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 Argentine national and provincial governments that 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); and 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 of each other, offshore in the Gulf of San Matias Gulf 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 for a dedicated pipeline to be constructed from Vaca Muerta to the Gulf of San Matias to serve gas supply to the FLNGs. The project expects to benefit from significant operational efficiencies and synergies from 2 FLNGs in the same area.
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By Aaron Simonsky reporting from Belize City. © 2025 Energy Analytics Institute (EAI). All Rights Reserved.
