Onboard production on Golar LNG’s floating LNG (FLNG) unit off Cameroon is to be increased by 0.2 million tonnes per annum after the project’s customers agreed to exercise an option they were holding.

Golar said Perenco Cameroon and Societe Nationale des Hydrocarbures elected to move ahead with his rise in their optional Dutch Title Transfer Facility (TTF)-linked production volumes from January 2023 to July 2026. They made an initial agreement on the rise in July 2021.

This will raise Hilli’s production volume of 1.4 million tonnes per annum.

The FLNG unit was built with four LNG production trains providing a total production capacity of 2.4 mtpa. But so far production has been running at 1.2 mtpa while additional gas reserves are proved up.

Senior Golar officials said a year ago that the company will not extend the charter contract on Hilli Episeyo beyond 2026, unless the unit can be utilised at full capacity.

Gas prices in Europe are currently approaching the record highs seen in the first quarter of 2022.

Golar said based on current average 2023 TTF gas prices of $45.49 per MMBtu the additional 0.2-mtpa of production can generate $135m of incremental annual adjusted Ebitda for the company.

For each $1.00 per MMBtu change in TTF, this adjusted Ebitda will increase or decrease by $3.2m, Golar added.

Over the option period, Golar said the total value of the additional production is approximately $267m in adjusted Ebitda to the company based on current TTF forward prices.

Giving further detail, Golar said its share of annual distributable Hilli adjusted Ebitda is expected to be about $286m in total, comprising $65m from fixed tarrif income, $86m from Brent oil linked earnings and $135m of TTF-linked cash.

The company said its portion of Hilli’s contractual debt is approximately $50m.

“Hilli is therefore expected to generate significant free cash flow to equity for the reminder of the fixed contract,” Golar said.

The company added that it may enter into hedging transactions to reduce the sensitivity of the commodity linked components of the unit's future earnings, as it has done in 2022.

Golar chief executive Karl Staubo said: “We are pleased to see continued TTF linked gas volumes from Hilli through the rest of the existing contract, maturing in July 2026.

Staubo said the additional volumes combined with Hilli’s “outstanding operational track record” will add significant free cash flow generation near term with no incremental capital expenditure.