KEPPEL Corporation on Tuesday said it will partner liquefied natural gas (LNG) shipping company Golar LNG to develop, construct and operate a floating liquefied natural gas (FLNG) facility to be located on the Mauritania and Senegal maritime border.
Keppel will partner Golar by subscribing for 30 per cent in Gimi MS Corporation through Keppel's indirect wholly-owned subsidiary First FLNG Holdings (FFH). The remaining 70 per cent in Gimi MS Corporation will be subscribed by Golar.
Gimi MS will take on the development, construction and operation of this FLNG facility. Concurrent to the share subscription agreement, Gimi MS has also executed a 20-year FLNG lease-and-operate agreement with BP.
Keppel and Golar have previously partnered on the FLNG Hilli Episeyo, the world's first FLNG conversion project, which Keppel said has been a "successful proof of concept" as a quick and cost-efficient solution for monetising stranded gas reserves. Hilli Episeyo has maintained 100 per cent uptime since commencing commercial operations in June 2018 and consistently despatched two LNG cargoes each month.
In a press statement on Tuesday, Keppel's CEO Loh Chin Hua said the Gimi investment can also be a seed asset for a possible infrastructure fund managed by Keppel Capital in the future.
"After the asset has been completed and de-risked, the 30 per cent interest may be injected into Keppel Infrastructure Trust," said Mr Loh.
With the funds from the subscription of shares by its shareholders, Gimi MS will acquire and own the Moss LNG carrier Gimi, which will be converted into an FLNG vessel by Keppel Shipyard. In December 2018, Keppel Shipyard received the limited notice to proceed from Golar to commence early conversion works. The carrier has been relocated from layup to Keppel Shipyard in Singapore where conversion works will soon start, Keppel said.
On completion of the subscription, Keppel's unit FFH will enter into a shareholders' deed with Golar and Gimi MS. Under the terms of the shareholders' deed, Gimi MS may issue cash calls on a pro rata basis to the shareholders, namely FFH and Golar, for future funding requirements for the construction, deployment and commissioning of Gimi based on an anticipated project budget limit of about US$1.3 billion, exclusive of financing costs.
FFH is committed to invest up to an estimated maximum total of US$250 million in connection with the project, inclusive of the subscription price.
Mr Loh said: "We are pleased to further strengthen Keppel's relationship with Golar in capturing growing opportunities in the LNG space. This transaction reflects Keppel's confidence in the prospects of the FLNG sector and that this investment will provide attractive risk-adjusted returns.
"Our investment is in line with Keppel's business model and harnesses the diverse capabilities of the group. We are pleased that Keppel Offshore & Marine has been chosen to execute this important project, which will further strengthen our capabilities and track record in the conversion of FLNG vessels."
Shares of Keppel Corporation closed on Tuesday at S$6.27, down five Singapore cents.