Golar LNG’s Argentina FLNG Play: A 20-Year, $13.7B Earnings Machine with Built-In Commodity Upside

The global LNG market is on the cusp of a decades-long boom, driven by energy security concerns, decarbonization mandates, and the rise of Asia as the world’s largest LNG buyer. Into this landscape steps Golar LNG (GLNG), which has just locked in a transformative, $13.7 billion earnings backlog through its FLNG (Floating Liquefied Natural Gas) projects in Argentina—a deal that combines defensive cash flows, commodity-linked upside, and minimal execution risk. This is a rare opportunity to invest in a 20-year, inflation-protected revenue stream with a built-in lever to global gas prices, all underpinned by one of the world’s largest shale reserves. Here’s why it’s a must-own position for energy investors.

The $13.7B Backlog: A Cash Flow Fortified by 20-Year Contracts

The cornerstone of Golar’s Argentina play is the 20-year FLNG charters with Southern Energy S.A. (SESA), a consortium that includes Argentina’s top gas producers (YPF, Pan American Energy, Pampa Energía) and Golar itself (10% stake). The two FLNG vessels—the Hilli Episeyo (2.45M metric tons/year) and the MKII (3.5M metric tons/year)—will generate $685 million in annual fixed revenue once both are operational (starting in 2027 and 2028, respectively).

This $13.7 billion earnings backlog is not a guess—it’s a contractually locked-in figure, with the first payments arriving in just two years. The fixed rates are CPI-adjusted, ensuring inflation protection, while the minimum terms are 12 years for Hilli and 15 years for MKII (with termination penalties to deter early exits). This is cash flow you can pencil in with confidence.

Commodity Upside: $100M/Year for Every $1/mmbtu Over $8

The real kicker is the commodity-linked tariff, which gives Golar 25% of Free-on-Board (FOB) prices exceeding $8/mmbtu. At current gas prices (~$6.50/mmbtu in Argentina), this upside isn’t yet triggered. But if global LNG prices rise—say, to $10/mmbtu due to winter demand or supply disruptions—the additional upside could add $100 million annually per $1/mmbtu over the threshold once both vessels are running.

This is a textbook asymmetric bet: limited downside (revenue can’t drop below $6/mmbtu, and discounts are capped at $210M total) but unlimited upside as prices climb. With LNG prices expected to average $8.50–$10/mmbtu through 2030 (per Rystad Energy), this mechanism could add $200M–$30kM annually to Golar’s bottom line.

Why the Risk Is Minimal: Regulators, Gas Supply, and Operational Synergy

1. Regulatory Ironclad:
2. Argentina’s government has granted a 30-year LNG export license—the first of its kind in the country—and qualified the project for the RIGI tax incentive program, reducing costs.

3. Environmental approvals for Hilli are already secured; MKII’s are pending but expected imminently.

4. Gas Supply Secured:

5. SESA’s partners have committed to fixed-price Gas Sales Agreements (GSAs), ensuring reliable feedstock from the Vaca Muerta shale, the world’s second-largest shale gas reserve. A dedicated pipeline from Vaca Muerta to the Gulf of San Matias is planned to boost supply reliability.

6. Operational Synergy:

7. Both FLNGs will operate in close proximity, reducing costs through shared infrastructure and logistics. This is no moonshot—Golar has decades of FLNG expertise, having pioneered the technology with the Hilli (the world’s first operational FLNG).

8. SESA Stake Adds Equity Upside:

9. Golar’s 10% ownership in SESA gives it a pro-rata share of gas sales profits, aligning its interests with the project’s success.

The Investment Case: LNG’s Growth Engine with a Built-In Hedge

This isn’t just a bet on LNG—it’s a structured play on two megatrends:
- Global LNG Demand Growth: The International Energy Agency forecasts LNG demand to grow by 50% by 2040, driven by Asia’s energy transition and Europe’s shift away from Russian gas.
- Argentina’s Energy Ambitions: The country aims to become a top-10 LNG exporter by 2030, and Golar is positioned to capture 10% of its projected LNG production via these FLNGs.

The math is clear:
- Base Case: $13.7B in fixed earnings over 20 years = ~$685M/year.
- Upside Case: Add $100M–$300M annually from commodity-linked tariffs and SESA equity.
- Risk Mitigation: Downside capped at $6/mmbtu; gas supply and regulatory risks eliminated.

Why Act Now?

Golar’s stock trades at just 5.5x 2025E EV/EBITDA, even as it locks in decades of cash flows. Competitors like Cheniere Energy (LNG) or Tellurian (TELL) lack the same long-dated, fixed-rate contracts and commodity leverage. Meanwhile, the Argentina projects alone could add $2–3 to Golar’s EPS by 2030—a number that could jump if gas prices rise.

This isn’t a high-risk shale play or a volatile commodity bet. It’s a blue-chip energy infrastructure deal with 20-year visibility, built-in upside, and zero execution red flags. For income investors and commodity traders alike, Golar’s Argentina FLNG projects are a once-in-a-decade opportunity to own a 20-year earnings machine at a discount.

Action to Take: Buy Golar LNG (GLNG) for a core energy holding, targeting a 15–20% return over the next three years as the FLNGs ramp up and gas prices rise.

Disclosure: This is not financial advice. Consult a licensed professional before making investment decisions.