New horizons for LNG Golar LNG

NEW HORIZONS FOR LNG

Golar LNG is at the forefront of the world’s liquefied natural gas shipping industry and developed the world’s first floating storage and regasification unit. Philip Yorke takes a closer look at a privately owned company that continues to optimise its potential in a fast growing marketplace.

Golar LNG was founded in 2001 from its predecessor, Osprey Maritime. Today the company is engaged in the acquisition, ownership, operation and chartering of LNG carriers and FSRUs (Floating storage and regasification units) through its many subsidiaries. Golar’s business was originally founded in 1946 as Gotaas-Laarsen Shipping Corporation. This company entered the LNG shipping business in 1970 when it ordered the LNG carrier ‘Hilli’, which is still a part of the Golar LNG fleet today. Innovative solutions

Golar LNG is actively pursuing new Floating Liquifaction Natural Gas (FLNG) projects, which fit in with its financial objectives and best capture its unrivalled technical capabilities. The company’s strategy focuses on the development of low capital cost, rapid deployment of floating facilities utilising the conversion of high quality existing LNG carriers, floating technologies for the liquefaction of pipeline quality gas, or associated gas, that requires minimal processing and other innova-

tive LNG solutions. This strategy complements Golar’s industry leadership position in floating LNG regasification facilities development.

In a further move by Golar LNG Partners LP, Glolar announced recently that it has entered into a purchase agreement to sell the ‘Golar Tundra’, a modern floating storage and regasification unit, to Golar Partners for a sale price of $330 million. The sale of the GolarTundra will enhance Golar’s liquidity by approximately $130 million. The sale has been arranged in accordance with the Omnibus Agreement, which regulates Golar’s obligation to offer any vessel on charter for more than five years to the partnership.

New joint ventures

Golar GenPower Brasil SA and ExxonMobile Titan LNG have signed a framework agreement for the supply of LNG. The new joint venture between LNG Power Ltd UK, a standalone non-recourse subsidiary of Golar LNG and GenPower Participacoes SA, was signed for the supply of LNG to the natural gas fired power generation project it is developing in the Brazilian state of Sergipe. The two companies have agreed terms covering the supply of LNG to the 1500MW Porto de Sergipe project. This framework agreement is a significant step towards a positive final investment decision on the Porto de Sergipe project, which Golar GenPower hopes will be the first of several Brazilian opportunities jointly delivered in years to come.

Another important joint venture was also announced recently by Golar LNG. This was the 50/50 joint venture with the investment vehicles affiliated with private equity firm, Stonepeak Infrastructure Partners. The new venture will offer integrated LNG based downstream solutions through the ownership and operation of floating storage and regasification units and associated terminal and power generation infrastructure.

Stonepeak shares Golar’s ambition to aggressively grow in the FSRU and LNG fuelled power market and is committing $290 million in new equity to develop Golar Power. A Golar spokesman commented, “By establishing this downstream entity with a strong

financial partner that has extensive experience in the energy business, Golar is to accelerate the realisation of its downstream ambitions and exploit the unprecedented number of opportunities in the current market.”

LNG prices are at a significant discount compared to oil prices and Golar Power sees a range of potential LNG Importers who would benefit from a rapid switch to gas. The first converted vessel is expected to be available within 16 months. There are only three unfixed FSRU newbuildings presently under construction and delivering within the next 30 months. Golar Power sees well in excess of three employment projects that could be met within this window. The conversion model allows Golar Power to cost-effectively address projects with bespoke requirements at a price that remains competitive with the all-in delivered cost of a newbuild equivalent. As the only company to have successfully converted LNG carriers to FSRUs, Golar expects that this partnership with Stonepeak will once again position it to aggressively exploit this competitive advantage.

First quarter financial highlights

In the first quarter of 2016 Golar LNG reported a loss of $21.7 million compared to a 4Q loss of $12.0 million. Agreed terms regarding the sale of GolarTundra added $30 million to Golar’s 1Q liquidity and a further $100 million in 2Q. The company also entered into a MoU with Schlumberger to cooperate globally on the development of greenfield, brownfield and stranded gas reserves using GoFLNG vessels.

The executed framework with ExxonMobil for supply of LNG to Brazilion power projects is now under development by Golar GenPower. Refinanced first newbuild LNG carrier Golar Seal released $48.7 million to 1Q liquidity. The GoFLNG ‘Hilli’ conversion is progressing according to schedule and remains on budget. The dividend is maintained at $0.05 per share for the quarter. The company told Industry Europe that its strategy is to grow its fleet on a profitable basis and to build upon its industry leading position as a ‘midstream’ solutions provider. n

For further details of Golar LNG’s latest activities and shipping services visit: www.golarlng.com