Golar and Partners Secure Landmark Argentine Gas Export Project
Golar LNG Ltd. has achieved a significant milestone, announcing the Final Investment Decision (FID) for the redeployment of its FLNG Hilli and fulfilling crucial conditions precedent for the Southern Energy project in Argentina. This pivotal move, in collaboration with its consortium partners, marks a definitive step towards transforming Argentina into a major liquefied natural gas (LNG) exporter, leveraging the vast resources of the Vaca Muerta shale formation.
The FLNG Hilli, a floating liquefied natural gas facility fully acquired by Golar last year, is slated for a 20-year charter agreement with Southern Energy SA (SESA), the project consortium. Operations are anticipated to commence in 2027. This redeployment follows Hilli’s successful tenure in Cameroon under a contract with Perenco SA, which concludes in July 2026. The strategic timing allows for a seamless transition into this new, high-potential venture.
Parallel to the Hilli’s FID, the Southern Energy partners have finalized definitive agreements for a 20-year charter of the MKII FLNG unit. This second floating liquefaction vessel is currently undergoing conversion in China. The consortium expects to reach a Final Investment Decision for the MKII FLNG later this year, with its deployment targeted for 2028. This phased approach underscores a robust, long-term commitment to Argentina’s gas export ambitions.
The Southern Energy SA (SESA) consortium represents a powerful alliance of local and international energy players. Under agreements established last year with Pan American Energy SL (PAE), Golar has secured a 10 percent equity stake in SESA. Local producer PAE commands a 30 percent interest, while Argentina’s state-backed energy giant YPF SA holds 25 percent. Argentine energy conglomerate Pampa Energia SA participates with a 20 percent share, and London-based Harbour Energy PLC rounds out the partnership with 15 percent. This diverse ownership structure brings together critical expertise and financial strength, de-risking the substantial investment required for such an ambitious undertaking.
A key factor in the project’s viability and investor confidence has been the unwavering support from Argentina’s governmental bodies. Both the National and Provincial Governments have granted all necessary approvals, including a groundbreaking 30-year unrestricted LNG export authorization – the first of its kind in Argentina. Furthermore, the project has qualified for the nation’s Incentive Regime for Large Investments, signaling strong governmental backing. The province of Río Negro has also provided crucial offshore and onshore Environmental Impact Assessment approvals for the FLNG Hilli, streamlining the regulatory pathway for deployment.
The FLNG vessels will be strategically positioned in close proximity offshore within the Gulf of San Matias in Argentina’s Río Negro province. This location is critical for monetizing natural gas from the Vaca Muerta formation, globally recognized as the world’s second-largest shale gas resource, situated onshore in the Neuquén province. Initially, FLNG Hilli will utilize spare capacity from the existing pipeline network. However, SESA has expressed its intention to facilitate the construction of a dedicated pipeline directly from Vaca Muerta to the Gulf of San Matias, ensuring a robust and exclusive gas supply for both FLNG units.
For Golar LNG shareholders, the financial implications of these agreements are substantial. The company anticipates an impressive $13.7 billion in earnings backlog, before adjustments, stemming from the two FLNG charter agreements. The FLNG Hilli charter alone is projected to generate a net annual charter hire of $285 million for Golar. This fixed revenue stream is complemented by a significant commodity-linked tariff component, offering Golar 25 percent of free-on-board (FOB) prices that exceed $8 per million British thermal units (MMBtu).
The MKII FLNG agreement further bolsters Golar’s financial outlook, with an annual net charter hire of $400 million. This second vessel also incorporates the same commodity-linked tariff structure, providing substantial upside potential. The consortium projects that for every $1/MMBtu increase above the $8/MMBtu threshold, Golar stands to realize an additional upside of approximately $100 million annually once both FLNGs are fully operational. This commodity-linked component offers significant exposure to the robust global LNG market dynamics.
While these agreements establish long-term commitments, provisions exist for potential adjustments. SESA retains the option to reduce the term of the FLNG Hilli agreement to 12 years and the MKII FLNG agreement to 15 years, subject to a three-year notice period and the payment of an associated fee. However, the overarching structure, particularly the substantial fixed charter rates combined with the upside-oriented commodity-linked tariff, positions Golar LNG for sustained revenue generation and enhanced shareholder value over the next two decades. This project solidifies Golar’s position as a critical enabler of global LNG supply, tapping into one of the world’s most promising unconventional gas plays.
