Golar LNG Ltd (GLNG) 2015 Q4 法說會逐字稿

Good day and welcome to the Golar LNG Limited quarter four 2015 earnings conference call. Today's conference is being recorded.

At this time I would like to turn the conference over to Mr. Gary Smith, CEO. Please go ahead, sir.

Thank you very much and welcome to the 2015 Q4 results call. The agenda for today's call will follow along familiar lines. I'll quickly run through the highlights of the quarter, and then go to Brian Tienzo who is with me here in London to walk you through the financials.

And then I'll come back with a business update, and then a summary and outlook for the coming quarters. So on the presentation turning to page 4, we announced today a reported loss of $12 million for the quarter, as compared to our 3Q loss of $5.9 million, the deterioration primarily the function of a deteriorating short-term LNG carrier market.

As previously announced, we're pleased to confirm that Perenco and SNH have signed with Gazprom an eight-year sale and purchase agreement for LNG that is to be produced from the Golar LNG Hilli to be employed in Cameroon. During the quarter, Golar took delivery of its latest FSRU, the Golar Tundra, and she confirmed a five-year contract with West African Gas Limited, West African Gas being a joint venture between NNPC, the national oil company of Nigeria and Sahara.

A lot of activity on the financing side during the quarter, including the initial drawdown of $500 million against the $960 million debt facility for GoFLNG Hilli and indeed post-quarter land there has been a second $50 million drawdown against that facility. We announced earlier this year the signing of a memorandum of understanding with Schlumberger to cooperate on the development of floating LNG projects on a global basis covering greenfield, brownfield, and existing projects. And I'll come back and talk a little more about that a bit later in the call.

Post the end of the quarter, the Golar Tundra has now been sold to Golar Partners for the sum of $330 million. Announcing today for the first time we have secured a charter for Golar Arctic.

We're going to service -- or go on hire during this month, with an intended service in Jamaica as an FSU. And I'll talk a little bit more about that later on.

We're pleased to announce the appointment of Ms. Lori Wheeler Naess as a director, and she will also chair the Company's order committee. And then finally the Board has set a dividend for the quarter at $0.05 a share. I'll now hand it over to Brian and come back and fill you in a bit more on the details as we get into the call.

Thank you, Gary, and turning to page 6 of the presentation, we will look at the financial highlights of the quarter. As Gary already alluded to, we're slightly disappointed on the decrease in net -- in EBITDA from what we saw in improvement in the Q3.

Unfortunately the Q3 improvements that we saw didn't really continue to materialize into Q4. And as a result of that, our net revenue was down by $3.5 million to $11.5 million in 4Q from $15 million in the third quarter. The main reason for that particular draw up is really on two vessels. Both the Golar Arctic and the Golar Grand contributed revenues in the third quarter.

Unfortunately those two vessels, which were older steam vessels, didn't contribute in 4Q. There was a decrease in revenue arising over that of approximately $2.1 million. There were also other smaller decreases in the quarter from the third quarter, but really the Arctic and the Grand were the notable ones.

As you can see there in the box, the first red box, other voyage expenses decreased slightly from $5.7 million in Q3 to $4.3 million in Q4. Now, despite vessel utilization not improving further in 4Q, as we announced the core performance allowed our utilization in TCE to be at least consistent with our 3Q statistics.

And as a result, Q3 TCE at 43% was matched by Q4 TCE -- sorry, Q3 utilization at 43%, was matched by Q4 utilization of 42%. And despite a reduction in revenue, the TCE for the quarter improved from $10,750 to now $13,809 per day.

You will have noted that in previous quarters one of the biggest variables that you'd see in our financials is regarding net financial expenses and income, and unfortunately that is, again, notable in our fourth-quarter results. So in Q3 we had net financial expenses of approximately $126.5 million, and in Q4 that's reduced to $36.2 million, in both cases the biggest variable in there with regards to the mark-to-market of our total return swaps.

In 3Q we posted net financial expenses regarding the total return swaps of approximately $68 million. In Q4, albeit it's dropped, it's still a material amount of approximately $36 million.

These losses, particularly in Q4, are mitigated by mark-to-market gains and interest rate swaps of $16 million, as short to medium term rates improved at the end of December. Also included in our net financial expenses and income, is net interest expense of approximately $9.2 million. All of that has resulted to net loss for the quarter of $59.9 million against Q3's loss of $143 million.

Turning over now to page 7 to look at the balance sheet, I think the balance sheet movements for the quarter can be summarized really in three points. One is regarding the cash movement, which was particularly affected by the posting of $305 million with respect to Perenco to the Cameroon FLNGLC, and of course we announced the Tundra, the potential sale of that to Golar Energy Partners and looking to conclude that in March, and the ongoing Hilli conversion program.

So going to the first point regarding the dropping in cash, as you can see there cash dropped from $222 million from 30 of September to $105 million at the end of December. As already alluded to, the biggest variable that's contributed to that is the posting of $305 million to procure the issuance of $400 million letter of credit that we submitted to Cameroon FLNG project. Since then the $305 million is being decreased to $208 -- to $280 million.

The $280 million is split into two tranches. One regarding the short term, $100 million of that is regarded as short-term, and the other one, $180 million, is regarded as long term. And this is why you see a restricted cash in the second red box there of $180 million at the end of December 2015.

You also see a material increase in other current assets in the first box. The main reason for that is as we announced the sale of the Tundra to Golar LNG Partners in February, we had to treat that vessel as a current asset.

And as a result both the value of the asset and also the value of the loan pertaining to that asset are both treated as short term. On the third box you'll have seen an increase in our expenditure with regard to assets under development from $435 million at the end of September to now $501 million at the end of December.

As Gary alluded to earlier, now that we have triggered the amount at which we can start drawing down on the facility, that -- the Hilli and that all points towards the Hilli conversion. The Hilli conversion and its progress going forward is now fully funded.

Turning over to page 8, there isn't really anything new to say in here. I think the vast majority of the variances has been highlighted there pretty much explained in the previous page, so instead I will go straight to page 9, look at our liquidity review.

Again, as announced in our 3Q earnings, we posted $305 million of cash to be able to secure the issue letter of credit to our Cameroon FLNG counterparts. This was subsequently reduced to $280 million, but nevertheless had an overall impact on our liquidity during the fourth quarter.

However, that was particularly partly mitigated by the release of $260 million during that quarter, consisting of $100 million of cash from Golar LNG Partners in respect of the Eskimo vendor loan, the release of $50 million from the financing of FSRU Golar Tundra, and then we've also financed the Golar Viking which released at additional $62.5 million, and of course the inaugural $50 million equity release from the first drawdown on the Hilli pre-delivery loan. Despite this, the Company remains focused in making sure they remain sufficient in liquids in order to continue to achieve its growth aspirations.

To this end, today we are working on projects that will free up additional cash. First of those we've already announced is regarding the Golar Tundra drop down, which we expect to contribute approximately $130 million when completed.

And also, we announced further the refinancing of two LNG carriers, and we expect each to free up approximately $60 million per vessel. The first are those refinancings we've closed within March, and we expect the second refinancing to close shortly thereafter.

We're of course cognizant of the continuing challenges when it comes to shipping, whilst we and our peers believe the second quarter will finally show evidence of improvements on the back of new production volumes. We are nevertheless putting in place certain measures that will further release additional liquidity. For example, in addition to the two ships that we're refinancing, we continue to explore the refinancing of another four vessels, and we expect each one to contribute somewhere between $50 million to $60 million depending on the debt level achieved.

Our press release also revealed some more detail about our intention to progress with Golar Power. When realized the separate entity will likely issue the building contract for their FSRU due for delivery in 2017 and potentially take on ships for FSRU conversion while fazing them [out will not necessarily] bring in new liquidity. At a minimum we expect that it will take partial responsibility for the CapEx, OpEx, and debt service of those vessels, and thereby preserving cash at GoFLNG level.

We also announced a reduction of our dividend payment to $0.05 per share. This equates to an annual loss payment of approximately $20 million from the previous annualized level, approximately $170 million, and we expect this to continue until such time as Hilli becomes operational and therefore becomes self-funding. As you can imagine all of the above measures converge to achieving our main objective, which is to be able to focus in proclaiming FID on GoFLNG Gandria by midyear without the need for increased liquidity through a new equity.

Turning over now to page 10 to discuss how we are managing debt maturities. And so we don't have any debts maturing in 2016. However, in 2017 we have our $250 million convertible bonds maturing in March of that year.

And whilst these are currently trading below par, my personal view is that as we get closer to completion of GoFLNG Hilli conversion we can talk more about other FLNG opportunities we allude to the in the press release. The stock value will improve and therefore the bonds will be trading in the money.

Nevertheless, we're already looking at a variety of options that will deal with this. We talk about the financial -- talking to financial institutions about extending the term of the bonds, potential for a couple of years, and that would make it mature close to where our GoFLNG Gandria becomes operational and of course GoFLNG Hilli will be in operation by then also.

We've already received indicative top offers on this, which could be achieved -- to highlight how this could be achieved. Of course, the bonds and maturity, the MLP units that secure the bonds, will be released. And as of today Golar's aggravated investment value in Golar Partners is approximately $239 million excluding the GP.

The GP currently contributes $8.8 million in dividends, and all of these could also be used within refinancing structures to improve turns and economics of any refinancing we do to deal with the convertible bonds. As we alluded to in the press release, we will share with investors our strategy and how we will address this in our 1Q 2016 results announcement.

Further ahead in 2018, we have two ships maturing in terms of their financing. The Golar Seal matures in October 2018. This is the ship that is being refinanced now, and so will have been dealt with by the end of March.

Golar Celsius matures in November of 2018. The amount of outstanding at that time will be approximately $75 million. Of this $15 million is a commercial charge and $50 million is an ECA charge.

We only need to refinance the $15 million commercial tranche because by doing so would automatically extend the term of the ECA tranche. Regardless of that, we expect Golar Celsius to be one of the ships in the refinancing package that we are doing now.

As you can already gather, we're very focused in liquidity now and also in the medium term. All of what's described so far is designed to make sure that we're able to a certain degree progress with developing our business franchises. And on that note, I will now turn the presentation over to Gary to discuss with you our various business activities.

Thanks very much, Brian, and I'll kick off again on page 11 of the presentation. And one change on the familiar Golar portfolio slide, and that is the charter of Golar Arctic to New Fortress. And one change to be flagged, which is the sale of Golar Tundra up into the partnership, which will take place we think shortly.

I'll move on to slide 13, which is the first of the slides in the business update section of the presentation; and slide 13 deals specifically with LNG carriers. As we've mentioned now a couple of times already on this call, the spot market for LNG carriers has remained disappointing throughout the fourth quarter.

We're seeing utilizations maintained around the 40% to 43% level, with some softening into the headline charter rates associated with that. Moreover, as we see Q1 unfold in front of us, we don't see a material improvement in the current quarter.

But what we do see right now is a lot of activity on the liquefaction side, with a range of new projects either just starting or getting ready to start. Indeed Cheniere have loaded their first cargo from Sabine, and I'm told reliably that Gorgon had a ship standing by ready to receive their first cargo as that plant goes through its final startup activities.

The projects on the east coast of Australia are now all running and ramping up and Cheniere will follow with the train two startup in Sabine Pass shortly thereafter. So in aggregate, there's quite a wave of new incremental LNG capacity coming on stream right now as we speak. And that gives us some confidence that we will start to see an improvement in the spot market from Q2.

Looking a little bit further out, and I'm looking at the balance between carriers on order and production, new LNG production capacity actually under construction. It's pretty clear to ourselves and most commentators that at some point this market will go short, and the current expectation is that will be from 2017. So our projection is an improvement, albeit steady, from Q2 forward with a more solid and acceptable and pleasing market sometime in 2017.

A new piece of business which we're announcing today is indeed the charter of Golar Arctic to New Fortress Energy, and she will go into service as a floating storage unit, or FSU, in Jamaica. The industry has made many trips to Jamaica over the last ten years trying to support the case for a new FSRU, but the size of that market makes it difficult to progress with an FSRU project in Jamaica.

What New Fortress has been successful in doing is to promote a small-scale LNG supply chain into a number of power stations in Jamaica, where Golar Arctic will act as their storage unit and ship-to-ship transfer on the smaller vessels which will then deliver LNG in smaller parcel sizes into the various end customers. This is a business model which we think has application in a number of geographies around the world, and hopefully is the start of a new channel of business for Golar and indeed the industry more generally.

Talking in terms of our strategy for LNG carriers going forward, I'll talk in a moment about the potential to convert carriers into FSRUs, but we're also now perhaps more aggressively than historically chasing long-term employment for particularly the 10-year build carriers. I'll switch to page 14 and commence by talking about FSRUs.

As I've said, Golar Tundra is now in our hands. She is currently sitting outside port limits in Singapore about to commence some relatively minor mods to make her suitable for employment in Tima in Ghana. And once those modifications are complete, which won't take long, she will then make her way slowly to Ghana where she will go on hire in the second quarter.

The level of activity on the business development side of our FSRU business remains healthy and strong, with what seems an ever increasing level of inquiries, a range of different counterparties in many different geographies around the world, and like our competitors in this business, they're all seeing an increased level of activity. Somewhat driven by that buoyant market, and I wish to rebalance our exposure between carriers and FSRUs, we have been progressing a strategy in recent months to understand what it takes to convert a new build tri-fuel diesel and electric carriers into FSRUs.

And indeed the model which we've used to progress this strategy is the Golar Eskimo, which indeed was converted partway through construction in the yard. We're at the point now where we believe it not only is technically feasible but also makes good sound economic sense to progress with these conversions, and we're getting ready to hit the go button on that.

As Brian alluded to, we are also developing our thinking around packaging those conversion projects without our power activities. Moving on to Golar Power, we had announced previously the Brazilian opportunity, which we have been progressing in joint venture with GenPower.

And just to recap, in auction last year GenPower and Golar secured conditionally a 25-year PPA for a new build 1.5 gigawatt power station in the state of Sergipe in the north of Brazil. As part of this venture, Golar has the exclusive right to provide the FSRU to this project, and indeed we have the option to participate in 25% of the power project in addition to the FSRU.

And our intention has always been since the announcement of this project is to house this investment in a stand-alone non-recourse subsidiary of Golar. And what we're indicating today is the intention to package this investment along with FSRUs; so specifically the new build FSRU and perhaps two of our conversion candidates into a new -- into the Golar Power where Golar would still be the majority shareholder.

Agreements for -- there are three substantial agreements associated with this project. Firstly, the FSRU supply, which as I just said is exclusively for Golar to provide, an APC contract for the construction of the power station, and I'm pleased to announce that APC contract is at a very advanced stage and finally and most importantly the sourcing of LNG to supply the power station with a profile that matches the demand from the power station.

And again, we are very close to announcing that arrangement and that theme in it. All of this is working toward our final investment decision for the Sergipe project of third quarter 2016.

If I move on now to floating LNG, and turning to page 15 of the presentation. Very pleasing to report that Hilli continues to make good progress, and still good control of budget against schedule and estimate.

During the quarter -- so sorry -- early this quarter, Hilli floated out of dry dock with the sponsons now fully attached, and for those of you who can see the pictures on the slide pack, you can see some pictures of her coming out of the dock with the sponsons attached, and with some processing equipment already installed inside the sponsons. The vessel is now alongside the Key, and focus is now quickly turning to building up the top sides with the process plant, installing pipe racks, and progressing the project towards completion.

Almost all the major equipment items are now in the shipyard. I think the latest known major equipment item to deliver is in good time of June of this year. And so no issues there in terms of supply of major equipment items.

At this stage, focus within the Company now is turning toward commissioning and pre-operations of the vessel. We are recruiting people in the shipyard, we are recruiting people in Oslo, and we have just recruited our in-country manager to be employed in Cameroon. One year from now we will be well into commissioning activities in Singapore prior to sailing to Cameroon.

And finally, in relation to the conversion projects, we have negotiated during the quarter a deferral of the notice to proceed for the Gimi and Gandria projects on identical terms, but at a later start date of end of 2016.

Moving onto page 16, which deals with the first two GoFLNG projects. And firstly just a recap, really, of the Cameroon project, which is now fully announced. The project has an 8-year life with a production of 1.2 million tons per annum.

The two main documents for Golar, the tolling agreement and the guest convention, are fully executed. Gazprom have now been confirmed, or Gazprom marketing and trading more fully are now confirmed as the LNG buyer, and startup remains scheduled for Q2 2017.

As Brian mentioned, financing for this vessel is in place, and indeed we've now taken the first two drawdowns against that project. And the business development activity for this project is now directed more towards both increasing the throughput of the vessel and extending the term of the vessel, albeit early days in relation to those two agendas.

Moving on to Equatorial Guinea, which is really the next location for the GoFLNG growth story. Good progress has been made with Ophir in progression of the Fortuna project, which has a 20-year project life at a production of 2.2 million tons per annum, which is normally the full capacity of the vessel.

We announced during the current quarter Schlumberger signing a cooperation agreement with Golar, and then shortly thereafter Schlumberger have started to commence the due diligence process on the Ophir/Fortuna project with the intention of stepping into the upstream side of the project as both a supporter of the project execution and financing the upstream element of the project as well. For us this has been a very exciting new development, and we believe enhances the GoFLNG story quite considerably.

Along with the new participation of Schlumberger, it has enabled discussions on acceleration of a second FLNG vessel for Fortuna. The resource size in Equatorial Guinea is sufficient to support two GoFLNG vessels.

With the [hilstad] brought to the project by Schlumberger, there's now a very real prospect of an early FID on the second vessel for that project. Ophir have made good progress on the sale -- on the marketing of the LNG, and they're now down to a short list of three buyers for that project.

The tolling and the umbrella agreements for this project are at an advanced stage, and as I mentioned previously the term sheet for the vessel financing for the Equatorial Guinea project is now also being bounced backwards and forwards between Brian and the banks. Startup remains on track for 2019, with an FID on this project still holding at mid this year.

Turning to page 17 and looking a little bit further down the calendar, the GoFLNG business development activities continue at a pace. I think we now have good momentum on the back of the success in Cameroon, the emerging success in Equatorial Guinea, and low oil prices meaning that result holders are knocking on our door wanting to understand more about what it is we're doing. Moreover the cooperation announced this quarter with Schlumberger greatly enhances the GoFLNG value proposition.

If you consider the range of counterparties that we talked to, they range from very substantial oil companies down to very lightweight junior explorers. What Schlumberger allows us to do is to talk with any one of those counterparties in a very solid and meaningful way, which wasn't always the case at the lighter end of the spectrum.

They also provide quite some financial capability, particularly through the upstream and [limit] to the project. Now because the growing list of opportunities within our opportunity funnel, during the quarter we've been through a ranking exercise and have now decided to prioritize our effort toward two additional projects, that is additional to Cameroon and Equatorial Guinea.

Each of these projects has the potential to employ multiple FLNG vessels, and we believe we're in a strong position to execute abiding heads of terms, very similar in nature to the document we signed with Ophir back in May of last year with at least one of these two projects by around the middle of this year.

And we're clear line of sight now toward several FLNG projects from Hilli, fully FID to perhaps two vessels in Equatorial Guinea, which we hope will take FID around the middle of this year, and then several more maturing quite firmly now. Our target of having five or more GoFLNG vessels operating or under conversion by the end of the decade looks increasingly real.

And then finally then to summarize and to wrap up before taking questions, we believe as previously stated the achievement of FID with Hilli was a very significant milestone in the delivery against the FLNG strategy. And we think that from that point we've turned the corner in FLNG, and from here it's very much about execution and continuing.

The spot market for LNG carriers is challenged, and quite frankly we don't see a lot of improvement through Q1, but there is good and sound reason to believe that from there going forward things will improve. There is a lot of new capacity coming on stream progressively now, actually for two or three years at least, and that capacity will of necessity need carriers to transport the cargos, and of course we're well placed.

The recently concluded charter with Golar Arctic to New Fortress Energy is an exciting and new channel of business for Golar, and it does demonstrate what can be done with an entrepreneurial and fresh approach to business development in the LNG space. Longer term for carriers the focus is now firmly moving toward term employment of the carriers, and in line with that freeing up equity to progress more attractive areas of growth for the Company.

Continuing good business development progress on all parts of the business really, FSRUs, [how] and FLNG, and solid progress on refinancing of existing assets and securing favorable terms from financiers for GoFLNG growth.

The cooperation with Schlumberger and the potential to replicate that on the downstream power side with a new entity is focusing the mind at the moment, and we think by combining the Schlumberger cooperation our clear midstream leadership and an associated downstream entity has the capacity to not only reduce complexity in the execution of LNG supply chain deals, but speed up development cycle times as well.

As Brian said, clearly there's a very strong focus on maintaining liquidity to fund growth, and in relation to that the dividend has been reduced in line with the numbers already announced.

And then finally, but certainly not least, we are very pleased to welcome Ms. Lori Wheeler Naess to the Board, and she will role of chair of the order committee. So at this point I'll conclude the formal part of the presentation, and if the operator would be so kind we'd be very happy to take questions.

Thank you.

(Operator Instructions)

We will now take our first question from Michael Webber from Wells Fargo. Please go ahead.

Hey, good morning, how are you? Hey, a bunch of stuff to run through this morning. First around new FLNG projects, Gary, you mentioned you are prioritized and you're focused around two primary areas.

Can you give us a sense of what you're looking at in terms of geography? And then in terms of reserves versus something more akin to early stage production that could turn into something larger and purely FLNG. I guess maybe trying to compare this to projects you're already working on versus say bigger pockets of reserves.

Sure, happy to do that. Firstly, one of the two opportunities -- so reason it's narrowed down to two specific projects is simply a matter of maintaining focus and properly resulting opportunities.

The first of these two opportunities, and the one that probably looks progressed is another west African opportunity. It's a very significant resource base; so the resource is still being explored, but as currently announced it could employ more than two vessels, but all our discussions at the moment are on the basis of at least two. And we were hopeful of securing a bonding HOT with them along similar lines to what we had achieved with Ophir around the middle of this year.

The second of the two opportunities is a Middle Eastern opportunity, which we have discussed at various times. It's again quite a scalable opportunity. There are some issues which need to be navigated with that opportunity, but we continue to work it.

Fair enough. Maybe specifically if I think about the African project that you are focused on, how would the credit/counterparty risk there compare to what you currently have in your book, if I think about how that portfolio and that credit risk evolves over time?

That's a difficult question to answer. I mean, there is a potential for Schlumberger to come into this project as well, so that has material bearing on the security and the risk of the project.

It's material. It's at the upper end of the various projects we've been working. I don't think I want to say more than that at this stage.

Okay, fair enough. I guess one or two more for me and I'll turn it over. Obviously the dividend cut was something that you talked to as a possibility last quarter and something that's been kicked around the market for a long time. Now I guess as I think about the forward liquidity profile, I guess now through 2018, which would be the pre -- or end of 2018 is pre-material FLNG cash flows.

How do you think about the funding for additional FLNG carriers from here on out? Do the cash savings here mean you can fund those assets without having to staff any new capital markets and fund it by cash from operations? Just help us conceptualize the new liquidity profile for you going forward.

Mike, it's Brian. I think certainly that was the intention in trying to put all these events into place, to try and really take on the various one more FLNG project without having to consider the -- tapping into the equity markets, which has always been one of our concerns and certainly an investor's concerns as well.

So the reduction of the dividend, and it's a material reduction, as I'm sure everyone can appreciate. Prior to this we were paying $170 million worth of dividends, and now on an annualized basis would only be paying around $20 million.

Certainly that helps a lot as well as -- in terms of preserving liquidity. And while we haven't yet finalized and made firm the financing for the second FLNG, there is going to be a certain element of equity required in there.

What I mean by that is that Golar will have to -- as we did with Golar FLNG Hilli, Golar will have to contribute certain amount of cash in that. We tried to reduce that as much as we can, but clearly there is going to be an element of that. And this, the reduction in dividend, the refinancing of the vessels, and of course the Tundra dropdown will go towards making sure that we don't have to pause when it comes to taking a 5-year on Gandria.

Fair enough. I guess one more for me and I'll turn it over, and this is around the regas segment. You note the potential new strategy in converting more modern carriers to regas assets, which would be somewhat capital intensive.

And you also reference separating out the downstream business. I would I believe, I guess the assumption is that those two would potentially dovetail together, so I guess my question is that a scenario where when you say Golar owning a stake in that, is that something where you would have a strategic partner and they would share in the capital outlay there?

Is that something that you would try to float? I guess how do you think about that, and then I guess if they are -- if that is the conversion idea dovetails with separating the downstream business, would that mean the carriers and the conversion candidates would go with that asset base or would they stay with Golar parent?

Okay. Let me and make a start.

Sorry, Gary.

Yes, let me try and make a start on that answer, and Brian might jump in at the appropriate point. So the business case for the FSRU conversions is driven by a fairly light order book for FSRUs going forward. A high degree of interest.

Conversion economics, which makes sense; the fact that Golar really is the only company in the world to have successfully converted carriers into FSRUs. We've done four; Spirit, Winter, Nusantara, and Freeze were all previous conversion candidates. So we've built up quite a reference list of successful projects.

So the ability to deliver quickly, the capability in house to deliver, an order book which we think is lightweight, and the opportunity for us to rebalance our portfolio within the Company more towards FSRUs and away from carriers all seems to make good sense. We've concluded the technical due diligence to the point now where we have a good handle on what it will take technically and commercially to do the conversion. The need to also progress with the Brazilian project seems to suggest that there's a good synergy between provision of our FSRUs and then combining that with a position which was built in Brazil which has application in a number of parts around the world.

In terms of -- Golar will still be the majority owner of whatever it is that we create, but we do see the opportunity to bring in probably a strategic partner in much the same way that we brought Schlumberger in on the upstream. We agreed to work together. We see the opportunity to replicate that structure downstream of the Company such that we have strong partners or associations with strong partners, both upstream and downstream of our midstream business. And then together we can execute projects.

At the end of the day, what people really want is power. No one really is interested in having a jar of LNG in their fridge. What they really want is power. And so what we're trying to do is connect from the wellhead through the wire leaving the power station, a business execution model where we're dealing with people we know, we can execute quickly, and we can reduce significantly the cycle time.

I don't know if you want to add to that, Brian.

I think Gary's covered most of the really pertinent points regarding this project, but certainly from the financing side, I think having, as I alluded to already, having a strategic partner within this carve-out company and making sure that each partner has something material to contribute to those projects will help to finance the project as well. We've seen previously how the Sergipe project was complemented by having FSRU by Golar going in there with an FSRU.

I think we expect the same synergy effect by putting a couple of more -- even more than two vessels in there that would be converted into FSOs. And as far as how that could be constructed, I think as I alluded to the intention is that Golar will remain a majority shareholder of that piece of business, but it will require or it will have some help from strategic partners to make sure that the capsule outlay and the ongoing servicing of those vessels is not left for Golar to care on its own.

There was one more element to your question which I neglected to answer. That is at this stage there is no intention to put the balance of the carrier fleet into the power company.

Right. Okay. And if you hold the majority stake it's a formality at that point. Okay. All right. I appreciate the time. Thank you very much.

We will now take our next question from Fotis Giannakoulis from Morgan Stanley. Please go ahead.

Please go ahead, sir. Your line is open.

Can you hear me?

Yes, we can.

Hello?

Go ahead, Fotis, we can hear you now.

Go ahead, sir, your line is open.

Yes, I want to follow up on your comment about your Middle Eastern opportunity. And I assume that we are talking about the comment that they came out of Iranian officials about potential cooperation with Golar. Trying to understand what kind of restrictions there are right now, and how is it for a -- these restrictions to be lifted given the US sanctions?

Fotis, thanks for your question. I think hopefully you'll understand if on this call we prefer not to confirm the counterparty or comment on the issues currently in front of us on that project. I think it's commercially sensitive and something which we would prefer to work quietly on at this point in time.

I fully appreciate. Can you clarify if you are bound by these restrictions given the fact that you are a European company and not a US company?

What I will confirm to you is that we will always stay with strictly within the intent of the laws and rules that govern our operation wherever we operate.

Thank you, Gary. And regarding your cooperation and the partnership that you have crafted with Schlumberger, how do you see this partnership developing? Are there any specific fields that Schlumberger or any of its customers own? Or these are projects that you have been developing already and Schlumberger might come and step in like the case of Ophir?

And also if you can comment about your cooperation and the CapEx requirement for this and all FLNG projects? I'm not talking about the Ophir project, I'm talking about new projects. Could Schlumberger facilitate the financing process on your side, or its involvement is going to be strictly on the upstream side?

Okay. Thanks, Fotis. Let me deal with the first part of the question first.

I think the answer is all of the above. You see already publicly announced Schlumberger's potential participation in the Ophir project, and we're now heavily into various discussions involving Schlumberger, not so much Golar but Ophir. And clearly their participation in that project strengthens not only the project execution, but through the agreement being negotiated provides the potential to finance a significant proportion of Ophir's cost to execute that project.

So that's one clear example which we can clearly point to, which was almost immediate on announcement of the cooperation. As I said previously, we now talk to a whole range of counterparties, which range from literally oil major players who may choose to lose Schlumberger but probably wouldn't, to quite lightweight junior explorers where quite frankly we would struggle to get comfortable in terms of a counterparty risk perspective. By narrowing Schlumberger with those junior resource holders, in effect what we do is create a much more substantial counterparty not only for Golar but ultimately for the buyer of the LNG from the project as well.

So the intent is to revisit a number of our opportunities to see whether a partnership approach might be better. Moreover Schlumberger had their own knowledge and information as to where projects might lie, which up until now may not be clearly in our field of view. So what we see is a joint marketing effort if you will between Golar and Schlumberger to shore up those projects which are already on our development list, to revisit projects which perhaps we might have passed over previously because we assessed that the counterparty was not sufficiently solid for us to move forward, and indeed identify projects which up until now have been outside our field of view.

Thank you, Gary. Can you -- given the low oil and gas environment and there is a discussion about the difficulty that LNG suppliers are having securing long-term agreements, can you remind us your break events and your anticipated economics for projects in west Africa? What is that an upstream provider needs to achieve in order to get sufficient 10%, 15% IRR?

And what is your cost for your FLNG and the breakeven? In other words, what is the breakeven that you have in order to make your required rate of return?

Okay, Fotis, I'll be brief. Because I'm not sure if this call allows for a full analysis of the cost, but we believe it's possible to develop and produce stranded gas in west Africa at something like $1 gas price into our vessel. And then if you add another say $0.50 for tax and royalties, then roughly speaking it's $1.50 gas into our vessel.

With an acceptable return for the upstream resource holder and for the host government, applying a similar earning or IRR, mid-teens IRR, we can produce LNG assuming a fairly generic project, no special technical complications, et cetera, et cetera. Now toll all in the region of $2 per MMBtu, so lets say $4 FOB West Africa looks to us to be profitable for Golar for the upstream participant and the host government. If you say $1 freight to most parts of the world then we're $5 something delivered LNG from West Africa into most markets around the world.

That's very helpful. And how you envision the new contracts, and especially if you can comment on the potential contract with Ophir? I think in the past you have mentioned that you were looking for a high -- for a contract which is going to be flat for the entire duration of the contract. Are there any discussions of having a lower floor than what you had discussed before with the higher upside participation to oil prices or the prices of the commodity?

So let me, again, deal with this question generically. Our base business proposition when talking to counterparties is to offer a toll comparable to US Gulf Coast, albeit in any part of the world. So what we can do is replicate a flat toll on our vessels in any geography that we can locate one of their vessels.

As you know for the Perenco Cameroon project what we agreed to do is impact the index to toll in that case on Brent, but in theory we could do it on any related gas or commodity exposure. And the reason for doing that is to protect the overall project economics in a low oil price regime.

And so we've let that cat out of the bag, and I guess we're going to be talking about that construct in projects going forward, and we've clearly demonstrated the ability to do that. I'm reluctant to talk about the specifics of the Ophir negotiation at this moment in time because it really is a large negotiation, and I don't think it's appropriate that we delve into that at this moment in time other than to say once it's done, and as we did with Cameroon we will share with investors in the market more generally the construct that we end up with.

Just to pick up on an earlier part of your question, we're doing these deals in a world where the oil price is $30 a barrel, and we're happy to do the deal, the LNG buyer is happy to do the deal, the upstream participant is happy to do the deal, and the host government is happy to do the deal. So to my mind that's the clearest possible demonstration you can give of the robust nature of the economics for our business proposition.

Thank you, Gary. That's very helpful. One last question to Brian. Brian, you just concluded the refinancing of two LNG carriers, and that drove down over $60 million on additional vessel.

Can you remind us how many more vessels do you have with a relatively low debt? And what additional cash can you get if you do similar transactions, similar leasing financings on these vessels?

I think just to clarify, Fotis, so of the two vessels which you alluded to as completed, one of those vessels is looking to be completed within the next couple of weeks, and then the second one is actually completing shortly thereafter. Those deal with the two that we mentioned in the press release.

When it comes to the other vessels, we are -- there are potentially four more other vessels that could follow the same vein of financing. So some of those vessels we have a slightly higher amount of debt on them at the moment. And so the amount of equity you could release from those would be slightly less.

But it ranges somewhere between $50 million to $60 million per vessel. So once completed, you could be looking at potentially liquidity released of anywhere between $200 million to $214 million in those ships.

Thank you very much, Brian, that's very helpful.

Thanks, Fotis.

We will now take our next question from Erik Stavseth from Arctic Securities. Please go ahead.

Hi, I was listening to your comments on the well to wire. I think it's very exciting, and I want to get a little bit more feel on the power purchase in Brazil. Can you, first of all, give us any comment on how much of those -- of the planned capacities committed? I understand that it's 1.5 gigawatt plant, so is the entire plant committed?

So the construct there is we enter into a PPI, a payer purchase agreement, for the provision of capacity of 1.5 gigawatts regardless of whether that capacity is dispatched or not. So in the press release I think we referred to a return of something like 18% on total capital, which refers to the capacity -- the capacity payment.

So if we build the plant and it were never to operate, then that's the return that we would enjoy over the following 25 years. If the project is dispatched, and this is a [midnear valstation], then there is the ability to earn over and above the capacity payment, the payment upon the price of which we secure LNG.

So an important component of this project has been to secure LNG at a price which matches what we bid in the auction. And I think I mentioned a few minutes back that we're close now to announcing the secure of LNG supply on terms favorable to what we had estimated in our bid. And in bid on the power station, the EPC contract for the build owned and operating of the power station, again, the numbers we're seeing are favorable to our base assumptions.

Right. And then the second question is the price you're being paid, is that BRL6.2 million? Or is it converted to dollars so you have FX receipt as well?

So there is -- it's indexed, Erik, but the vast majority of it is to Brazilian reals. There is a component of it that's also in US dollars, but the biggest chunk is in reals.

The power component -- the energy component is in US dollars. The capacity payment is in reals which are inflation indexed.

Alright. And then what kind of -- how much LNG would you be needing for that power plant, roughly 1.5 million tons on a 1,500 megawatt plant?

It's roughly 1.5 million tons. I think from memory it's something like 19 carriers per annum.

Alright. Thanks. That's all for me.

Thank you, Erik.

We will now take our next question from Ben Nolan from Stifel. Please go ahead.

Thanks. Yes, so just following up on Erik's question, could you remind me about how much excluding the FSRU, how much capital outlay would there be towards say the Brazilian project or any similar project in terms of Golar's participation?

I think that's obviously something that we haven't yet disclosed, Ben, and it's really more of a work in progress. It all very much depends on the vessels that we've put in there, the conversion cost that we eventually land on when taking account into two or three ships that we may put on to that power company. So the answer to your question is we -- that's something that we currently don't know offhand yet.

Okay. That's fair. Actually, and as it relates to the FSRUs and the new approach or the renewed approach of converting existing carriers into FSRUs, first of all, I assume that is something that you would do on a speculative basis or maybe a tentative basis without a firm contract in place. And then approximately how much would it cost to do a conversion like that, and how long do you think it would take to -- from start to finish?

The cost of a conversion -- of a converted unit is comparable to a vessel out of the yard of similar specification. The time to actually physically execute the conversion in the yard is of the order of 4 to 6 months, again, a little bit dependent on the specification for the conversion.

The lead time from the commitment to a project to actual delivery of a FSRU is probably of the order of 16 to 20 months, the difference being the lead time to order and have delivered the regas scheme. So we would, as we did with Golar Freeze and Nusantara projects, order a skid, which [does the gliate, which possibly] the regasification, and then we would have some 4 to 6 months to install the skids and the associated piping and instrumentation on the vessel.

Okay. And you would say order a skid without necessarily having a contract in place? Is that a fair assumption?

That is one approach which we could take, for sure.

Okay.

Once we have a skid on order then we're able to move quickly should we secure a contract. And 12 months into that order we're 4 to 6 months away from being able to deliver a fully functional new efficient FSRU.

Okay. And then lastly for me, I'm curious if you can give a little bit of color around perhaps the rate that you were able to achieve for the Arctic? Or if you don't want to talk to that, maybe more generally are you actively participating in tenders for LNG carriers? And any sense of where the market is for longer term charters if you were to be successful there?

You'll understand, Ben, if I don't reveal the rate at which we picked Arctic at. It's probably better than some comparable businesses that we're seeing recently done.

Yes, we are participating in LNG tenders, LNG shipping tenders. In fact, there's one going in today, and we've flagged our intent to be more aggressive there.

We see with this wave of new LNG capacity coming on stream, some LNG buyers have left light their decision to acquire ships or to charter ships. We're hopeful that might be an opportunity for us.

Okay. And the rates let's say relative to the spot market, how would you categorize or think about quantifying what a longer term rate would be comparatively?

So there really has not been and there never has been in my experience a strong correlation between what you see in the spot market and what you see in the longer term market. The longer term market has always provided ships at a number which makes sensible return for the owner, whereas the spot market is very much a function of the day-to-day supply/demand balance. And so the most recent long-term LNG charters have all been $70,000 something a day.

Okay. Great. Sounds good. And just lastly along those lines, how long do you think -- these tenders seem to be having been dragged out quite a bit. Do you think we're getting closer to a point where some of those will be finalized, or is this just a function of a weak energy market that drags out the process?

I hope so. Sooner or later this LNG is going to arrive so, you know. We think going forward now is a good time to start securing long-term charters, and that's where we're going to put a bit of our effort.

Great. All right, well I'll turn it over. Thanks a lot.

Thanks, Ben.

We will now take our next question from Ken Hoexter from Merrill Lynch. Please go ahead.

Great. Good morning, and good afternoon to you. Gary, could you just talk about maybe a bit on the timing of the final FID for Ophir? Is that still targeted midyear this year? Is there any other change in your thought there?

Yes, Ken, thanks and sorry to keep you waiting. The target remains middle of this year. There are a number of things that have to happen to make that happen, and maybe I can just quickly run through them.

We need to conclude the tolling agreement, and what in Equatorial Guinea is called the umbrella agreement, which is very much like the gas convention that we had in Cameroon. So the fiscal and regulatory parameters for the project, both those documents are at a pretty advanced stage now.

Ophir needs to conclude the marketing of the LNG and [interlegal] LNG SPAs [done within] the project. The role of Schlumberger in the project needs to be finalized, and that's a discussion currently underway.

Brian needs to conclude his financing on the Gandria, but we're completely confident that he will achieve that based on a very good track record. What else is outstanding?

They're the main elements. The target is to have most of those work streams concluded early to mid-Q2, which would then facilitate a process of ratification and Board approvals and an announcement around the middle of the year.

Okay. And I guess maybe one for Brian. Last quarter there were a lot of surprises, maybe some of the locking in of capital that constrained, that weren't I guess a surprise to the Street in terms of how your financing structure was moving forward.

Would you say that it seems that it's been freed up a bit, or at least you've taken steps? And I guess I'll just [dive in and cut it], it is one part of that constraints or is there no new highlights there? Maybe, Brian, if you could talk a little bit about that?

Sure, Ken. So I think obviously with I mean liquidity being one of the focuses of the Company at the moment and given the performance of the vessels that we have, having those remaining operations will obviously continue to be a constraint to the Company. Having said that, I think we've narrowed down a list of action points that we are either putting into place or about to put into place in order to try and make sure that those constraints do not actually require us to pause on the projects that we have.

As I said I think we all agree that the posting of $280 million in LCs is obviously something that is very material to the Company that could actually have allowed us to progress more quickly on certain projects. Regardless, we have to deal with that.

The bank which has issued the LC continues to syndicate the LC, and we expect that some of that cash will probably come back to Golar soon. Nevertheless, we are looking at the refinancing of the vessels; two of those will be done fairly soon, and the other four we expect to be done before we take FID on Gandria.

The ones who have done the Gandria I think there will be a certain amount of capital that Golar can put to work, but I think at that point we need to have a look at other assets within the Company that allow us to free up or make flexible other financing. As Gary mentioned just now, it's good that we completed the financing on the Hilli because it gives us a skeleton upon which we can put bones, we can put meat in.

So the discussions that we are having on Gandria at the moment are along the same lines as how we started up in the Hilli. Obviously the progress on the Gandria is going to happen much more quickly because we've prodded that root already, and the documentation on that is still fresh in our minds to some extent. So while the time line is a bit more constrained, we do have at least a very good head start when it comes to both commercial discussions and documentation.

That's helpful. And I think Gary had mentioned still target five FLNGs by the end of the decade. Just to clarify though, the Hilli and the Gandria are still the calendar, right? You're still not moving with that extra carrier in between? So anything now would be after?

Yes, I think that's right, Ken. I think -- the five includes Hilli and Gandria clearly. And the sequence, which the projects deliver as we see them will probably involve a little bit of leapfrogging.

So you may well see project number three delivering its first vessel before the second vessel in Equatorial Guinea, for example. So we're, as I said previously, increasingly confident of four vessels either producing or somewhere in the process of being converted.

You're hitting on there on exactly my question, though, you think that project three may still come before Equatorial Guinea and Gandria?

Realistically I don't think so. I think we've all but given up on that, but we haven't declared defeat publicly yet.

Perfect. Understood. Thank you for that, Gary. And then lastly just switch to [near now] exporting its first LNG cargo recently, you, going back to Ben's back and forth on rates, it sounded like you were saying $70,000 is most recently a good charter rate. But as I understood your then follow-up, I just want to clarify, you're saying that there is no more -- or you're not seeing a big step up in activity to lock those in, or you're starting to see some rumblings where you can now move forward and secure some additional charters for these -- for your vessels?

Just to qualify, when I said $70,000 something as a charter rate, that's clearly against a long-term charter. So I think spot voyages are clearly happening at numbers I guess half of that number in the current market.

But long-term deals, and I think some of our competitors in the last 12 months have done longer term charters, which we could point to which as we understand it start with a seven. And that's the sort of number needed to provide an acceptable return to the owner typically. But the spot market, which is quite decoupled from the term market, is clearly a function of the dynamic at the time.

Understood. Hey, Gary and Brian, and Stuart thank you very much for the time. Look forward to catching up later.

Thanks, Ken.

We will now take our next question from Herman Hildan from Clarksons Platou. Please go ahead.

Good afternoon, can you hear me?

We can hear you.

The first question relates to the press release when you announced the Schlumberger contract. You had a comment there where you say we announced the first project within two months, which takes it to March. Is it possible to give some color on that and whether that is still the case?

I think the first project was announced within nanoseconds of the cooperation agreement going out. But the first project which we were flagging in the cooperation press release was indeed Ophir.

We hadn't quite anticipated it would follow on as quickly as it did. But that was what we were alluding to at the time.

Right. And then on the other partners that you've held so far in development of FLNG, Keppel and then Black & Veatch to taking ownership in the asset. Should we expect Schlumberger to take an ownership in the asset as well? And do you think that will be larger or same size as the -- for the [himrea] on Keppel and Black & Veatch?

Hi, Herman. I think going back to Keppel and BV, those partners of ours have already communicated their desire to remain owners of future FLNGs that we will do. With regards to Schlumberger, they've also communicated the same now.

The extent to which they become owners is yet to be decided. I think unlike Keppel and BV where they were very much involved in the feed study and actually developing the project with us, Schlumberger is less so to that extent.

And so they need to do some work, which they're doing now in looking at the project, and at some point we expect that they'll come back to us with their proposal. But today we don't have a specific number in mind that we can disclose to you.

Right. That's okay. And also speaking about Keppel, I mean if you look at Keppel's potential growth there, as we saw the industrial sector looks quite grim and obviously an FLNG is an important part of their business. Can you say something about whether there's been any changing in terms on construction financing or so on for additional FLNGs?

Yes, I mean I would say that the relationship between Keppel and Golar is quite symbiotic. I think we're strongly supportive of each other and working together.

I think as a result of having now progressed well into the first conversion, there are some lessons learned, albeit not that many, not perhaps as many as you might have anticipated. But we are learning better ways to do things, more efficient ways to execute.

Clearly a lot of what we've done in the first project is simply a matter of carbon copy for the subsequent projects. There will be improvements and we would expect that to be reflected in price and terms, but I wouldn't expect it to be material.

So we see things certainly improving, and it's not just Keppel and Black & Veatch, but there are all the equipment suppliers who are supplying into the vessel. I think it's very pleasing that we're this far into a major project and we're not chasing any of our suppliers for delivery.

So whether it's pumps, compressors, distillation columns, call boxes, gas turbines, all that is coming through pretty much to schedule. And so this is a nice time to be doing this work. I think all of our partners came to work with us, and I think you all see some improvement, but I think at a headline level it will be probably lost a little bit in the noise.

Right. In your report you talk about potential financing on the Fortuna FLNG and terms being better than the entire financing on the first one. What kind of depth capacity would you say that the unit has on a [feeded degray] basis? And also once it's up and running, should projects finance, or could you give some color on that as well, please?

Sure. So as alluded to, we're looking at a variety of structures there. Obviously we were quite successful in putting the GoFLNG Hilli into a [semi lease like] financing, and I think that kind of contract length of GoFLNG Hilli being a firm 8 years with Perenco, as of today we're suitable for that kind of financing simply because it allowed us to get a much longer profile. Now with the Ophir project, as Gary said, it's a 20-year deal, and in my mind that's why it's a sweet spot for project finance structure. Now when we say that we're looking for improvements, we're saying that relative to what we achieved in Hilli.

You'll remember that we were able to achieve 60% [prudelue] financing and then jumping to 80% on the completion of the vessel. So the base case that we're trying to achieve is simply that.

Actually the discussions that we've had with the potential finance providers is to try and increase those numbers that I've just mentioned in order that one, we're able to progress the project and limit the equity participation of Golar as much as possible, and also at the time of delivering the vessel the amount of equity that comes back to Golar is a bit more substantial. So those are the parameters that we're working at. I think that as far as the pricing is concerned, again it's going to be fairly comparable to the growth LNG financing that we concluded a couple of months ago.

And then when you contribute equity into the FLNG from all the partners with an equity stake, is that the amount throughout the basis, or is there any call it different way orders when you pay slots if for example Schlumberger moves into the --

Sorry to cut you off, Herman. No, it's basically a provider basis. So you'll remember that Keppel and ourselves and BV all contribute towards the equity contribution -- all contributed towards the equity contribution for the Hilli. That is, again, the target that we would put into place were we to craft the shareholders' agreement in respect of the Fortuna FLNG. It will be a pro-rata across the shareholders.

Right. And then moving over to Golar Power, where will you source the gas from? The LNG call it. Have you decided that yet?

So you're just going to have to be a little bit patient on that. We're very close to being able to say publicly where the LNG is coming from.

And what's the startup of the pipeline?

Under the terms of the contract it needs to be operational by early 2020, but there is nothing that prevents us from starting earlier if we can be ready.

Okay. And then just on the return on the power plant, you mentioned 18% is the best if it isn't called upon. But if it is called upon on the 100%, how high will the return potentially go then if you have a $5 payment and if you delivered price into the power plant?

So there is very much dependent upon the LNG supply contract, which we're as I keep saying very close now to finalizing. It's another few percentage points.

So the vast majority of the return on that project is derived from the capacity. And then somewhat dependent on how the dispatch profile looks going forward, then there's a little bit more upside for us on that.

Okay. And just the final question. You mentioned you're obviously working on increasing utilization, but you also had a comment on increasing the term of employment. Can you -- is that 8 to 10 years, or is it a more meaningful increase in the term if you're successful in doing that?

Well, the vessel is built for a 20-year life. So the objective is to employ as much of that as we possibly can.

So at the moment we're contracted at half the main plate capacity of the vessel for eight years, but we clearly see the potential to double up on capacity and extend the term. Although I caution you shouldn't just double the earning potential of the vessel.

There will be a renegotiation there for sure with whatever we end up doing. And I think we have previously made public what a step up to freight claims would look like.

Yes, yes. Well, thank you very much. That's all for me.

Thanks, Herman.

We will now take our next question from Sunil Sibal from Seaport Global Securities. Please go ahead.

Hi, good morning, good afternoon. A couple of quick ones for me.

When we look at the first two FLNG, one has a term of eight years, and I guess you're trying to extend that, and another one is 20 years. So for projects three to five, could you talk a little bit about what kind of minimum comps that you would be willing to accept in order to move the projects forward?

Sure. So the Perenco here is more the exception. The Perenco Cameroon Hilli project is the exception rather than the rule. And in some ways having some excess capacity on our first project provides a little bit of comfort.

But really going forward and the projects that we're currently working in Equatorial Guinea and then the other two projects which I referenced in my remarks earlier, are more towards the 20-year or are the 20-year life of the vessel and the full capacity of the vessel. So our base cash going forward is to use the full capacity of the vessel, and then depending on the size of the field employ a vessel for its full life.

And certainly the two projects which we're currently working not yet announced have the capacity to do full production for the full life. Ophir, if it's a one vessel project then for sure; it's 20 years, 2.2 million-tons. If it ends up being a two vessel project it could be that the vessel number two is somewhat short of life, but certainly well in excess of eight years.

Got it. That's helpful. And then I think you touched upon it briefly when we think about your cost of building or converting Hilli what is project number five by the end of the decade. Probably there are a lot of learning along the way. How should we think about cost synergies from that learning process in an FLNG?

I would assume, I mean each of the specifications of these projects is a little bit different. So we know in Equatorial Guinea where we're producing the reclaim of oil stream the CapEx will be higher and we're finalizing that right now. In terms of the -- and the compensation will be higher to compensate for the increased CapEx. But I think if you just want to think about it generically, my suggestion to you would be to hold the CapEx flat money of the day for the next five years.

Okay. Got it. And I think you ran through the economics for west Africa now FLNG project, I think you came up with the $4 FOB cost. I'm just trying to get a reconfirmation on the components of that.

You said $1.50 for gas coming into your vessel, and then the remaining $2.50 is basically your tariff plus operating cost reimbursement. Is there any other component to it?

No, the cost -- this is horribly simplified but it's the best we can do on a call like this. Clearly the upstream results owner needs to be incentivized and renumerated for his project. The host government will want a piece of that action, which results in very approximate $1.50 of gas into the vessel. We then need to generate a similar return, another $2 or so. In effect I've rounded that up to $4 to accommodate the uncertainty in this very inaccurate analysis.

So $4 FOB, and then I've certainly in this freight market $1 will get you almost anywhere in the world. So $1 landed into, certainly into Europe, and then another $0.50 say for the regasification tower from arrival in Europe would have you selling into Europe at $5 to $5.50 regasified.

That's helpful. And last bookkeeping for me. Are there any extension options on the Arctic contract that you signed?

There is a possibility of extending. So Fortress' position in Jamaica is extended well beyond the two years charter that we have with Golar Arctic.

We have put this business together quite quickly, and in many ways it's suboptimized, but clearly the intention here was to get something done and to move forward aggressively, which in the first instance Fortress has certainly done and we've played our role in supporting them there. So there is the potential for this to be a longer piece of business, and we will work the details of that out as the project starts up.

All right, very helpful. That's all I had. Thanks and good luck.

Thank you.

We will now take our next question; Chris Wetherbee from Citi.

Thanks for squeezing us in, this is [Prishan] in for Chris. Most of our questions have been answered. I just have two quick ones.

Regarding the Arctic and the Jamaica opportunity, what's the opportunity set for other projects like this in terms of maybe what you identified? If you can give us a sense of size and any color on geographies?

And following on that, if there's -- following on the last questioners asked about the rates, with these extensions would you expect the rates to start to move up maybe not too longer term charter rates, but somewhere maybe more approximating above that or splitting the difference between where we are at spot and charter?

The characteristics of the Jamaica deal are a market which is below the minimum threshold for a normal FSRU, and desegregated the main structures. So power stations are a couple hundred megawatts rather than 1.5 gigawatts, which is what we're talking in Brazil, and somewhat disbursed.

So as you think around the world, there are places such as Indonesia where a lot of their power like Jamaica is generated from liquids where each of the islands, and a lot of the islands in Indonesia could not support an FSRU but could support a [bite bulk] supply chain in small parcel sizes. And the incentive for them to switch from liquid to LNG is quite material.

And then you just cast your line around the world; places like India where there's huge efforts out for LNG but not a gas grid to support distribution of LNG, places in Africa predominantly in the developing world where there are desegregated demand centers which are currently deriving their fuel from liquids rather than gas. So it's in time it's quite material, but it will take some effort.

And typically Golar is not the company to be developing the sale of LNG in those markets, but by working with people such as Fortress and adding our capability to their expertise at least in Jamaica has proved successful. We're cautiously optimistic that we might be able to replicate that. But early days, we're still executing project number one.

Okay, thanks. That's helpful, I appreciate that. And just a last question, just wanted to get a sense more of market for carriers.

For the vessels on spot, and maybe could context this question in reference to the cool pool, how have lengths of haul developed? Obviously the carrier market is facing some headwinds, versus where we are, where we were maybe a year ago or exiting 2014, and to what degree is that part of the equation an impediment to utilization rates versus just the delay in liquefaction?

So I think I missed the first part of your question. In reference to --

Length of voyages.

Okay. Okay. I understand. So that hasn't been I think a significant contributor to what we're seeing today. 12 months ago we were seeing interregional trade.

So you were seeing on a regular basis cargos reloading out of Europe for delivery into the far east. So the same cargo not only was being carried twice, but was being carried significant distances as well.

But trade today seems to be more intra-basin, and that's because the albatross that used to live between the Atlantic and Pacific is essentially reduced to the point where there's no incentive for the traders to try and chase that albatross. So what we see is an increasing number of voyages, but the length of those voyages materially shorter than they were 12 months ago.

And that's really driven by a fall in LNG demand, and generally LNG demand in the big LNG consumers of Japan, Korea, China, and Taiwan. And I guess that's on the back of economic activity in those economies.

Offsetting that has been the opening of more markets. So we're seeing Jordan, Egypt, Pakistan, all countries new to LNG coming on stream at the same time.

Okay. And just to clarify then, could you give us a sense of just how much the voyage length has contracted versus maybe a year ago? Or is that a harder number to come up with?

I'm guessing, but it's about half, typical round trip voyages of 20 days rather than 40. But that's -- I would need to verify that.

Okay. I appreciate that. Thank you very much for the time. Appreciate it.

We will now take our next question from Gregory Lewis from Credit Suisse. Please go ahead.

Please go ahead, sir, your line is open. It appears he's stepped away. There are no further questions at this time.

Okay. Well, all that remains for us to do is to thank everyone for joining us, and we look forward to updating you at the end of the first quarter results 2016. Thank you and have a good day.

That will conclude today's conference call. Thank you, ladies and gentlemen, you may now disconnect.