New order fires starting gun on next LNG-carrier-to-FLNG conversion work with $2.2 billion budget

Bermuda-headquartered owner and operator of liquefied natural gas (LNG) midstream infrastructure Golar LNG is pooling resources with China’s CIMC Raffles and Black & Veatch to bring to life an MK II floating LNG (FLNG) vessel with an annual liquefaction capacity of 3.5 million tons of LNG per annum (mtpa).

While Golar LNG and CIMC have signed an engineering, procurement, and construction (EPC) agreement for the MK II FLNG, Black & Veatch, thanks to a deal with CIMC, will provide its licensed PRICO technology, perform detailed engineering and process design, specify and procure topside equipment, and provide commissioning support for the FLNG topsides and liquefaction process, similar to the role it played in the construction of the Bermuda-based firm’s existing FLNGs: Hilli and Gimi.

The last unit arrived at BP’s giant gas project in January 2024. Golar explains that its MK II design, which builds upon the MK I design of the FLNG duo, makes allowances for modularization of the construction process alongside further efficiency and operability advances. The new project involves the conversion of an existing LNG carrier to an FLNG unit, utilizing the 2004-built and Golar-owned Fuji LNG carrier with a storage capacity of 148,500 cbm.

Wang Jianzhong, CEO and President of CIMC Raffles, highlighted: “The signing of this new project further solidifies CIMC’s leadership position in offshore projects. It demonstrates CIMC’s ability to handle large, complex projects that meet the highest industry standards. CIMC will continue to focus on the independent development and manufacturing of high-end offshore equipment, committed to providing high-quality, innovative solutions for the global energy market.”

While the total EPC price is $1.6 billion, the total budget for the MK II FLNG conversion is $2.2 billion, inclusive of the conversion vessel, yard supervision, spares, crew, training, contingencies, initial bunker supply, and voyage-related costs to deliver the FLNG to its operational site, excluding financing costs.

Furthermore, Golar, which has already spent $0.3 billion to date inclusive of the conversion candidate, engineering, and long lead items which are now 63% complete, expects the MK II FLNG delivery in Q4 2027.

While the yard selection for the conversion was concluded two years ago, CIMC, Black & Veatch, and Golar spent approximately 350,000 man-hours subsequently optimizing the conversion process and de-risking project execution. CIMC was recently hired on an EPC deal to deliver two FPSO hulls to Seatrium.

Karl Fredrik Staubo, Golar’s CEO, commented: “We are pleased to announce the ordering of a MK II FLNG, a significant milestone for Golar and our partners CIMC and Black & Veatch. The ordering of the MK II FLNG strengthens Golar’s position as the market leading owner of FLNGs, increasing our controlled liquefaction capacity by about 70% to 8.6 MTPA.

“With a delivered price of around USD 600/ton of liquefaction capacity and an attractive Q4 2027 delivery, we believe today’s FLNG order is well positioned to offer prospective clients an attractive time-to-market to enable gas monetization, whilst driving value for Golar. We look forward to working with CIMC and Black & Veatch towards another successful FLNG delivery and hope to further expand the relationship with potential additional MK II FLNG units.”

Under the EPC agreement, the Bermuda-headquartered player has won an option for a second MK II FLNG conversion slot at CIMC for delivery within 2028, while the 2027 delivery is said to make the earliest available floating liquefaction capacity globally. According to potential charter terms in line with the most recent long-term FLNG charter agreements, the MK II FLNG has an earnings potential of approximately $0.5 billion of adjusted annual EBITDA, before commodity exposure.

Laszlo von Lazar, Black & Veatch’s Fuels & Natural Resources Sector President, underlined: “We are pleased to be working with CIMC and Golar on the MK II FLNG, following our support for Golar’s two previous floating LNG assets.

“The MK II represents our 6th floating LNG project to take a final investment decision utilizing our industry leading PRICO liquefaction technology. The MK II demonstrates a clear commitment to reliable, consistent energy through floating LNG, to help meet global demands during the energy transition.” 

Golar LNG struck a deal in July 2024 with Latin America’s Pan American Energy (PAE) for a multi-year use of an FLNG to leverage Argentina’s prolific natural gas resources, positioning the South American country for further LNG expansion.