The final investment decision has been made on the floating LNG (FLNG) project in Cameroon that will utilise Golar LNG’s carrier Hilli.
The binding agreement with Cameroon’s government, its state oil company, and independent oil company Perenco was finalised on 30 September. The agreement allows Golar to draw down up to USD700 million for the ongoing conversion cost of the Hilli, which is expected to begin producing 1.2 million tonnes of LNG per year in the second quarter of 2017 (2Q17).
According to Evercore ISI analyst Jon Chappell, “This contract marks the first proven FLNG agreement for Golar LNG, providing proof of concept for its broader initiatives, and representing another milestone on its way to a much bigger FLNG offering.”
Chappell believes the project is not reflected in Golar’s stock price, which been affected by “the panic-induced sell-off of every LNG shipping stock over the last few weeks”. He expects that once the market volatility eases, Golar LNG shares should “return to a more realistic representation of its FLNG franchise”.
That FLNG franchise is expanding, he said. “As Golar LNG finalises uses for its other FLNG assets – including the Gandria for which the final investment decision may be completed by mid-2016, but more importantly the Gimi, for which Golar LNG may commit to a new project by 1Q16 – more milestones may be forthcoming over the next 12 months, providing more likelihood that the projects will move forward.”
Golar LNG CEO Gary Smith maintained that the approval of the Cameroon project “demonstrates the competitiveness” of the company’s FLNG model “versus alternative approaches to LNG project development”.
“Golar is increasingly encouraged by the growing portfolio of interesting FLNG projects currently being discussed and developed,” he said.