Golar LNG has finally agreed with its partners to boost utilization of the FLNG Hilli Episeyo located offshore Kribi, Cameroon.
The LNG firm said on Tuesday it had agreed to boost utilization of the FLNG by 200,000 tons with Cameroon’s Perenco and Société Nationale des Hydrocarbures (SNH).
Golar has held talks on increasing the vessel’s throughput with the duo for a while now. The world’s first converted FLNG vessel has in May dispatched the 56th cargo since it started operations three years ago offshore Cameroon.
Hilli started commercial operations in May 2018 under production tolling deals with Perenco and SNH.
Russia’s Gazprom is the sole offtaker from the FLNG project taking 1.2 mtpa under an eight-year deal expiring in 2026.
Moreover, the gas giant is taking 50 percent of the vessel’s total 2.4 mtpa capacity produced from two trains. The FLNG has in total four trains installed onboard.
1.4 million tons
Starting in 2022, the capacity utilization of Hilli will increase to 1.4 million tons.
According to Golar, the tolling fee for the 2022 incremental capacity will be linked to European gas prices at the Dutch Title Transfer Facility (TTF).
“At current average 2022 TTF gas prices (avg. $8.70/MMBtu for 2022) the increased capacity utilization represents an expected $26.1m in incremental adjusted Ebitda,” Golar said.
For each $1.00/mmBtu change in TTF, this Ebitda would increase, or decrease, by $3.7m, it said.
Further throughput boost
In addition to the 2022 capacity increase, Perenco and SNH intend to drill and appraise 2 to 3 incremental natural gas wells during 2021, and subsequently upgrade upstream facilities in 2022 to support further sustained increases in production from 2023 onward, Golar said.
Under the agreement, Perenco and SNH have an option to increase capacity utilisation of Hilli by up to 400,000 tons of LNG per year from January 2023 through to the end of the current contract term in 2026.
The duo must declare the option during the third quarter of 2022.
This option has the potential to increase total annual LNG production from Hilli to 1.6 million tons from January 2023 onwards, Golar said.
The tolling fee for the 2023+ incremental capacity will also be linked to TTF.
“Based on current average 2023 TTF gas prices ($6.72/MMBtu avg. future price for 2023) the additional 400,000 tons of production would generate $30.4m of incremental annual adjusted Ebitda, the firm said.
Furthermore, for each $1.00/mmBtu change in TTF, this Ebitda would increase or decrease by $7.4m.
At current TTF future prices, the incremental adjusted Ebitda backlog of the potential increase in capacity utilization for Hilli from 2022 until July 2026 could reach around $113m, Golar said.
Targeting full capacity utilization
Golar has an 86.9% economic interest in the incremental adjusted Ebitda generated as a result of the agreement.
Also, the agreement will not change any existing terms, conditions, tolling fees or the Brent Oil link associated with trains 1 and 2, the firm said.
“The innovative tolling fee arrangement delivers on our announced strategy to increase our upstream LNG and gas exposure,” Golar CEO Karl Fredrik Staubo, said.
“Today’s announcement is a further testimony to Hilli’s strong track record of 100% commercial uptime since delivery in 2018 and will benefit all stakeholders involved in the project, as well as bringing us closer to our target to reach full capacity utilization of Hilli,” he said.