Golar LNG GLNG,a Bermuda-based company, is set to enhance its floating LNG production capabilities. The company has signed an Engineering, Procurement and Construction (“EPC”) agreement worth $1.6 billion with CIMC Raffles for a new MK II Floating LNG Production (“FLNG”) vessel. The vessel will have an annual liquefaction capacity of 3.5 million tons of LNG per annum.This agreement represents a strategic investment in advanced technology and modular construction, which should enhance operational efficiency.

Under this agreement, GLNG’s partner, Black & Veatch, will employ its licensed PRICO technology to conduct detailed engineering and process design. It will specify and procure topside equipment and provide commissioning support for the FLNG’s topsides and liquefaction process. This collaboration leverages Black & Veatch's successful track record with Golar’s previous FLNG projects, ensuring a strong foundation for this new venture.

The Golar MK II design builds on the MK I design from the FLNG Hilli and FLNG Gimi and involves converting the existing LNG carrier Fuji LNG, which has a storage capacity of 148,500 m3. The design evolution from the MK I to the MK II, using the existing Fuji LNG carrier, demonstrates Golar's commitment to innovation while maximizing existing assets.

The total EPC price is $1.6 billion, with an overall budget for the MK II conversion at $2.2 billion, covering various costs, including yard supervision and initial bunker supply. Golar has already invested $0.3 billion to date, with 63% of the engineering and long lead items completed.

The MK II FLNG vessel is expected to be delivered in the fourth quarter of 2027. Moreover, Golar has secured an option for a second MK II FLNG conversion with CIMC, with a potential delivery in 2028. This EPC contract follows Golar's recent agreements with Pan American Energy, which include a 20-year FLNG vessel deployment in Argentina.

Golar LNG is the sole provider of FLNG as a service. GLNG ranks first in terms of FLNG capacity. The FLNG market is growing due to its economic viability and is expected to display significant capacity growth, particularly in Africa and North America. Given the bright prospects associated with FLNG, the company’s decision to enhance its FLNG capabilities is highly prudent.

Driven by the robust FLNG market, GLNG shares have rallied 48% over the past year, surpassing the industry’s 31.5% growth.

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Zacks Rank

GLNG currently carries a Zacks Rank #3 (Hold).