Golar LNG’s Argentina FLNG Deal: A Strategic Leap into the LNG Export Era

Golar LNG Limited has solidified its position as a leader in floating liquefied natural gas (FLNG) infrastructure with two groundbreaking 20-year agreements in Argentina. The company’s FLNG vessels will unlock 5.95 million metric tons per annum (MTPA) of LNG export capacity from Argentina’s Vaca Muerta shale gas reserves—the second-largest such deposit globally—marking a transformative shift for both Golar and Argentina’s energy ambitions. This deal not only secures a $13.7 billion earnings backlog for Golar over two decades but also establishes a blueprint for monetizing stranded gas reserves in emerging markets.

Project Scale and Financial Fortitude

The agreements involve two FLNG vessels: the existing Hilli Episeyo (2.45 MTPA) and a newly converted MKII FLNG (3.5 MTPA). Together, they will generate a baseline annual revenue of $685 million from fixed charter hires alone, with significant upside tied to global gas prices. The Hilli’s charter hire is $285 million annually, while the MKII’s is $400 million. Both contracts feature a commodity-linked tariff: for every $1/mmbtu gas prices exceed $8/mmbtu, Golar gains an additional $50 million annually from the Hilli, rising to $100 million once both vessels operate. With global LNG prices averaging around $10/mmbtu in recent years, this mechanism could add hundreds of millions to annual revenues.

The financial structure is further bolstered by inflation protection via annual CPI adjustments and downside safeguards. A capped $210 million discount buffer ensures Golar’s revenue remains stable even if gas prices dip below $6/mmbtu. This combination of fixed income and upside exposure positions Golar to thrive in both bullish and bearish gas markets.

Gas Supply and Operational Synergies

The project’s success hinges on Argentina’s Vaca Muerta reserves, which hold an estimated 774 trillion cubic feet of shale gas. SESA, the consortium operator, has secured gas supply via fixed-price agreements with partners including YPF and Pan American Energy. Crucially, a dedicated pipeline will transport gas from Vaca Muerta to the Gulf of San Matías, where both FLNGs will be co-located. This proximity reduces infrastructure costs and enables coordinated operations, maximizing efficiency.

Regulatory Backing and Political Momentum

Argentina’s government has granted unprecedented support, including a 30-year unrestricted LNG export license and qualification for the Incentive Regime for Large Investments (RIGI), which offers tax breaks and fiscal incentives. Environmental approvals for the Hilli project have also been secured, minimizing regulatory hurdles. This governmental endorsement underscores Argentina’s commitment to becoming a top-10 LNG exporter by the late 2020s.

Strategic Implications for Golar

The deal cements Golar’s role as the sole proven provider of FLNG-as-a-service, leveraging its 79-year expertise to deliver scalable solutions. The $13.7 billion earnings backlog—before inflation adjustments and commodity upside—will provide a stable cash flow foundation, while its 10% equity stake in SESA adds commodity-linked returns. Analysts estimate that the project could contribute ~$300 million annually to Golar’s EBITDA by 2030, even without upside triggers.

Risks and Considerations

While risks such as project delays or gas price collapses exist, the robust contractual structure mitigates most concerns. The final investment decision (FID) has already been achieved for both vessels, with regulatory approvals for the MKII expected by year-end. Early termination clauses—allowing SESA to shorten the Hilli’s charter to 12 years or the MKII’s to 15—remain unlikely given the project’s strategic value to Argentina.

Conclusion: A Pivotal Moment for Golar and Global LNG

Golar’s Argentina agreements represent a landmark achievement in LNG infrastructure. The $13.7 billion earnings backlog alone positions the company for sustained growth, while the commodity-linked upside and inflation-adjusted revenues create a resilient financial model. With Vaca Muerta’s vast reserves and Argentina’s regulatory support, this project is not just a win for Golar but a catalyst for global LNG diversification.

As the energy transition accelerates, FLNG technology like Golar’s will play a critical role in unlocking stranded gas reserves, reducing emissions from LNG production, and meeting rising demand for cleaner energy. With first LNG exports expected by 2027 and a 20-year revenue stream secured, Golar has positioned itself at the forefront of a $500 billion global LNG market—poised to deliver exceptional value to investors for decades.