Golar LNG has struck up a new joint-venture with Schlumberger focusing on the FLNG market.

Christened OneLNG, Golar will hold a 51% slice of the business with its new partner controlling the balance. The brief is to rapidly develop low cost gas reserves to LNG.

Tor Olav Troim, vice chairman of Golar, said, "Our new venture with Schlumberger provides a powerful union of their oilfield services technology and production management business, and our low cost FLNG solution.

“It leverages Golar's LNG expertise, and builds upon our industry leading position as a midstream solutions provider."

The partners have put forward funds to cover the first project.

Positive reaction

Analysts say the development, which is targeting five new projects in the next five years, is a positive for Golar.

While further details on the level of capital commitments and the projects being sighted would have been preferable, one analyst tells TradeWinds they are pleased to see the formalisation of some of the company’s plans in the FLNG space.

Golar shares shot up on the announcement, rising 11.85% to $18.11 each at the time of writing.

Jonathan Chappell of Evercore ISI says the benefits of Schlumberger’s involvement are immense; including the "reputational boost to this technology" and strong financial backing.

Questions over the financing of FLNG projects have been a key overhang of Golar shares and with Schlumberger on board the ability to secure funds will be greatly improved, Chappell explains.

Simple and fast

Patrick Schorn, president of operations at Schlumberger, explained: "The technology platform and production management capability that Schlumberger brings will enable a total system approach, leading to a simpler and fast-tracked FID process, and reliable operational execution for the benefit of the gas resource owners."

Greg Lewis of Credit-Suisse said: “Despite the partnership being announced in January we view this as a win for GLNG as it puts some teeth behind the JV and should pave the way for the first joint-venture project.”

He speculates the development could see Golar moving into the market to purchase additional Moss configured LNG units for future conversion.

Ben Nolan of Stifel says FLNG projects are unlikely to boost Golar’s earnings until 2012 but he does say project announcements will have a material impact on the stock.

Look out for M&A down the road

Erik Nikolai Stavseth of Arctic Securities says while the ink is still wet on the venture it is worth considering longer-term merger and acquisition potential.

“Schlumberger has had a tendency to enter J/Vs ahead of acquiring companies once having found the right fit,” he explained.

“We do not see Schlumberger acquiring GLNG ‘tomorrow’, but it could over time complement Schlumberger’s ability to move from well to wellhead and further towards oil/gas midstream.”

The new venture comes three months after Schlumberger’s withdrawal from an FLNG project involving Golar in Equatorial Guinea.

Schlumberger terminated discussions with Ophir Energy to partner in the Fortuna FLNG scheme in April.