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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F
(Mark One)
 REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)  OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to 
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report 
Commission file number000-50113 
 
Golar LNG Limited
(Exact name of Registrant as specified in its charter)

 
(Translation of Registrant's name into English)
 
 Bermuda
(Jurisdiction of incorporation or organization)
 
 2nd Floor, S.E. Pearman Building,
9 Par-la-Ville Road, Hamilton
HM 11, Bermuda
(Address of principal executive offices)
 
 
Mi Hong Yoon
S.E. Pearman Building,
2nd Floor 9 Par-la-Ville Road, Hamilton
HM 11, Bermuda
Telephone: +1(441 ) 295-4705
 
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to section 12(b) of the Act.


Title of each classTrading SymbolName of each exchange
on which registered
Common Shares, par value, $1.00 per shareGLNGNasdaq Global Select Market



 
Securities registered or to be registered pursuant to section 12(g) of the Act.
None
(Title of class)
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of class)

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.
 
108,222,604 Common Shares, par value $1.00 per share
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YesXNo 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of 15(d) of the Securities Exchange Act 1934.
Yes NoX
 
Note- Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesXNo 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesXNo 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one).
Large accelerated filerXAccelerated filer Non-accelerated filer Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.     

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
YesXNo 




Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
 
U.S. GAAP
XInternational Financial Reporting Standards as issued by the International      Accounting
Standards Board
 
 
 
 
Other
 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 Item 18 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  NoX 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes No 







INDEX TO REPORT ON FORM 20-F
PART I PAGE
   
ITEM 1.
   
ITEM 2.
   
ITEM 3.
   
ITEM 4.
   
ITEM 4A.
   
ITEM 5.
   
ITEM 6.
   
ITEM 7.
   
ITEM 8.
   
ITEM 9.
   
ITEM 10.
   
ITEM 11.
   
ITEM 12.
   
PART II  
   
ITEM 13.
   
ITEM 14.
   
ITEM 15.
   
ITEM 16A.
   
ITEM 16B.
   
ITEM 16C.
   
ITEM 16D.
   
ITEM 16E.
   
ITEM 16F.
   
ITEM 16G.
   
ITEM 16H.
   
PART III  
   
ITEM 17.
   
ITEM 18.
   
ITEM 19.
   




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this report, the words “believe,” “anticipate,” “intend,” “estimate” “forecast,” “projected” “plan” “potential,” “continue,” “will," “may,” “could,” “should,” “would,” “expect” and similar expressions identify forward-looking statements.

The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. As a result, you are cautioned not to rely on any forward-looking statements.

In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include among other things:

our inability and that of our counterparty to meet our respective obligations under the Lease and Operate Agreement entered into in connection with the BP Greater Tortue / Ahmeyim Project (“Gimi GTA Project”);
continuing uncertainty resulting from potential future claims from our counterparties of purported force majeure (“FM”) under contractual arrangements, including but not limited to our construction projects (including the Gimi GTA Project) and other contracts to which we are a party;
claims made or losses incurred in connection with our continuing obligations with regard to Hygo Energy Transition Ltd. (“Hygo”) and Golar LNG Partners LP (“Golar Partners”);
the ability of Hygo, Golar Partners and New Fortress Energy Inc. (“NFE”) to meet their respective obligations to us, including indemnification obligations;
changes to rules and regulations applicable to liquefied natural gas (“LNG”) carriers, floating storage and regasification units (“FSRUs”), floating liquefaction natural gas vessels (“FLNGs”) or other parts of the LNG supply chain;
changes in our ability to retrofit vessels as FSRUs or FLNGs and in our ability to obtain financing for such conversions on acceptable terms or at all;
changes in our ability to obtain additional financing on acceptable terms or at all;
the length and severity of outbreaks of pandemics, including the worldwide outbreak of the novel coronavirus (“COVID-19”) and its impact on demand for LNG and natural gas, the timing of completion of our conversion projects, the operations of our charterers, our global operations and our business in general;
failure of our contract counterparties to comply with their agreements with us or other key project stakeholders;
changes in LNG carrier, FSRU, or FLNG charter rates, vessel values or technological advancements;
our ability to close potential future sales of additional equity interests in our vessels, including the Hilli and Gimi or to monetize our interest in NFE on a timely basis or at all;
our ability to contract the full utilization of the Hilli or other vessels;
changes in the supply of or demand for LNG or LNG carried by sea and for LNG carriers, FSRUs or FLNGs;
a material decline or prolonged weakness in rates for LNG carriers, FSRUs or FLNGs;
changes in the performance of the pool in which certain of our vessels operate;
changes in trading patterns that affect the opportunities for the profitable operation of LNG carriers, FSRUs or FLNGs;
continuing volatility of commodity prices;
changes in the supply of or demand for natural gas generally or in particular regions;



changes in our relationships with our counterparties, including our major chartering parties;
changes in our relationship with our affiliates and the sustainability of any distributions they pay us;
changes in general domestic and international political conditions, particularly where we operate;
changes in the availability of vessels to purchase and in the time it takes to build new vessels;
our inability to achieve successful utilization of our fleet or our inability to expand beyond the carriage of LNG and provision of FSRU and FLNGs, particularly through our innovative FLNG strategy;
actions taken by regulatory authorities that may prohibit the access of LNG carriers, FSRUs and FLNGs to various ports;
increases in costs, including, among other things, wages, insurance, provisions, repairs and maintenance; and
other factors listed from time to time in registration statements, reports or other materials that we have filed with or furnished to the Securities and Exchange Commission, or the Commission, including our most recent annual report on Form 20-F.

Please see our Risk Factors in Item 3 of this report for a more complete discussion of these and other risks and uncertainties. We caution readers of this report not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are not guarantees of our future performance, and actual results and future developments may vary materially from those projected in the forward-looking statements.We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. If one or more forward-looking statements are updated, no inference should be drawn that additional updates will be made.




PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.  KEY INFORMATION

Throughout this report, unless the context indicates otherwise, the “Company”, “Golar”, “Golar LNG”, “we”, “us”, and “our” all refer to Golar LNG Limited or any one or more of its consolidated subsidiaries, including Golar Management Limited, or Golar Management, or to all such entities. References to “Golar Partners” or the “Partnership” refer, depending on the context, to our former affiliate Golar LNG Partners LP (previously listed on Nasdaq: GMLP) and to any one or more of its subsidiaries. References to “Hygo” refer to our former affiliate Hygo Energy Transition Ltd (formerly known as Golar Power Ltd) and to any one or more of its subsidiaries. References to “OneLNG” refer to our former joint venture OneLNG S.A and to any one or more of its subsidiaries. References to “Avenir” refer to our affiliate Avenir LNG Limited (Norwegian OTC: AVENIR) and to any one or more of its subsidiaries. References to “NFE” refer to New Fortress Energy Inc. (Nasdaq: NFE), the third-party purchaser of Golar Partners and Hygo, which acquisition closed on April 15, 2021. References to “Cool Co” refer to Cool Company Ltd (Euronext Growth: COOL) and to any one or more of its subsidiaries. Unless otherwise indicated, all references to “USD” and “$” in this report are to U.S. dollars.

A.          Reserved

B.           Capitalization and Indebtedness

Not applicable.

C.            Reasons for the Offer and Use of Proceeds

Not applicable.

D.            Risk Factors

The risk factors summarized and detailed below could materially and adversely affect our business, our financial condition, our operating results of operations and the trading price of our common shares. We have categorized the risks we face based on whether they arise from our business activities or from the industry in which we operate and listed these based on management’s assessment of priority. Where relevant, we have grouped together related risks into the following categories:

Risks related to our FLNG project
Delays and costs associated with renegotiation of our conversion contracts and capital expenditure commitments with Keppel Shipyard Limited (“Keppel”) could adversely affect our earnings, cash flows and financial position; and
Given the sophisticated nature of FLNG conversions, we are reliant on a limited number of contractors with relevant specialized experience.

Risks related to our revenues
Our operating revenue is dependent on a high customer concentration which a loss of any of our customers could have an adverse effect on our earnings and cashflows;
Golar Hilli LLC may not result in anticipated profitability or generate sufficient cash flow to justify our investment;
We cannot guarantee that full utilization of the full capacity of Hilli will occur or if achieved, continues; and
We are subject to certain risks with respect to our contractual counterparties, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.

1


Risks related to our investments
Exposure to price volatility of our investment in listed equity securities could adversely affect our financial results;
Our equity investment in Avenir may not result in anticipated profitability to justify our investment; and
Our equity investment in Cool Co is subject to certain risks related to the LNG spot market.

Risks related to the financing of our business
We may not be able to obtain new financings, to meet our obligations as they fall due or to fund our growth or our future capital expenditures, which could negatively impact our results of operations, financial condition and ability to pay dividends;
We guarantee certain indebtedness of our affiliates and external parties. If certain of our affiliates and/or external parties are unable to service their debt requirements or comply with certain provisions contained in their loan agreements, this may have a material adverse effect on us;
Most of our financing agreements are secured by our vessels and contain operating and financial restrictions and other covenants that may restrict our business, financing activities and ability to make cash distributions to our shareholders;
NFE has agreed to indemnify us pursuant to the Golar Partners and Hygo Omnibus Agreements. The inability of NFE to satisfy its indemnity obligations to us could have a material adverse effect on our financial condition and results of operations;
If the Hilli letter of credit (the “LC”) is not extended, the earnings and financial condition of Golar Hilli Corp. (“Hilli Corp”) could suffer;
We are exposed to volatility in the London Interbank Offered Rate (“LIBOR”), and the derivative contracts we have entered into to hedge our exposure to fluctuations in interest rates could result in higher than market interest rates and charges against our income;
Servicing our debt agreements substantially limits our funds available for other purposes and our operational flexibility; and
Our consolidated lessor variable interest entities (“VIEs”) may enter into different financing arrangements, which could affect our financial results.

Risks related to our operations
A cyber-attack could materially disrupt our business;
A substantial increase in operating costs could have a material adverse effect on our financial performance;
Marine transportation and oil production are inherently risky, and our operations face several industry risks and events which could cause damage or loss of a vessel, loss of life or environmental consequences that could harm our reputation and ongoing business operations;
Failure to comply with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other anti-bribery legislation in other jurisdictions could result in fines, criminal penalties, contract terminations and an adverse effect on our business;
Vessel values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of vessels, we may incur a loss;
We will have to make additional contributions to our pension scheme because it is underfunded;
We are exposed to U.S. dollar and foreign currency fluctuations and devaluations that could harm our reported revenue and results of operations;
We may be unable to attract and retain key personnel, which may negatively impact the effectiveness of our management and our results of operations; and
We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.

Risks related to our industry
Our results of operations and financial condition depend on demand for LNG, LNG carriers, FSRUs and FLNGs;
Maritime claimants could arrest our vessels, which could interrupt our cash flow;
Political, governmental and economic instability and sanctions or embargoes imposed by the U.S. or other governmental authorities could adversely affect our business;
Our operations are subject to extensive and changing laws, regulation and reporting requirement, which may have an adverse effect on our business;
Climate change and greenhouse gas restrictions may adversely impact our operations and markets; and
2


Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

Risks related to our common shares
The declaration and payment of dividends is at the discretion of our board of directors;
If we fail to meet the expectations of analysts or investors, our share price could decline substantially;
Our common share price may be highly volatile and future sales of our common shares could cause the market price of our common shares to decline and could lead to a loss of all or part of a shareholder's investment;
We may issue additional common shares or other equity securities without our shareholders’ approval, which would dilute their ownership interests and may depress the market price of our common shares;
Because we are a Bermuda corporation, our shareholders may have less recourse against us or our directors than shareholders of a U.S. company have against the directors of that U.S. company; and
Because our offices and most of our assets are outside the U.S., our shareholders may not be able to bring a suit against us, or enforce a judgment obtained against us in the U.S..

Risks related to tax
As a Bermuda exempted company incorporated under Bermuda law with subsidiaries in the Marshall Islands and other offshore jurisdiction, our operations may be subject to economic substance requirements;
A change in tax laws in any country in which we operate could adversely affect us;
We could be treated as or become a passive foreign investment company (“PFIC”), which could have adverse U.S. federal income tax consequences to U.S. shareholders;
We may have to pay tax on U.S. source income, which would reduce our earnings; and
We may become subject to taxation in Bermuda which would negatively affect our results.

Risks related to our FLNG project

Delays and costs associated with renegotiation of our conversion contracts and capital expenditure commitments with Keppel could adversely affect our earnings, cash flows and financial position.

In February 2019, we entered into a 20-year Lease and Operate Agreement (the “LOA”) with BP Mauritania Investments Ltd (“BP”) for the charter of the FLNG unit, the Gimi, to service the Gimi GTA Project, which was expected to commence operations under the LOA in 2022. In April 2020, we announced the receipt of a written notification of a FM claim from BP that due to the global outbreak of COVID-19, it was unable to be ready to receive the Gimi in 2022, instead delaying acceptance by 11 months. There is currently no FM, however, we cannot guarantee that there will not be further delays on the Gimi GTA Project.

The LOA further provides both parties with the right to suspend or terminate the agreement under certain circumstances after performance has begun, including as a result of a prolonged FM event. Should we be unable to meet our obligations under the LOA in a manner that gives rise to a right to terminate the agreement by BP, we could be obligated to pay substantial damages to BP which would have a negative impact on our earnings, cash flow and financial condition and could make it difficult to induce counterparties to contract with us for future FLNG conversions.

The $700 million debt facility agreement that we entered into in October 2019 to finance the Gimi conversion was expected to be drawn down in line with our contractual capital expenditure requirements. Changes to the overall Gimi project budget following the agreed revised project schedule with BP was minimal. However, we cannot guarantee that there will not be further delays on the cash inflows from the $700 million debt facility, which could result to delayed vessel delivery and the related commencement of operations.

3


Given the sophisticated nature of FLNG conversions, we are reliant on a limited number of contractors with relevant specialized experience.

The highly technical work related to FLNG conversions can only be performed by a limited number of contractors, and due to the new nature of the technology, only a very limited number of contractors have relevant experience with FLNG conversions. Accordingly, a change of contractors for any reason would likely result in higher costs and a significant delay to our delivery schedules. In addition, given the novelty of our FLNG conversion projects, the completion of retrofitting our vessels as FLNG vessels could be subject to risks of significant cost overruns. If the shipyard is unable to deliver any converted FLNG vessel on time, we might be unable to perform our obligations under the related charter terms.

Furthermore, if any future FLNG vessels, once converted, are not able to meet certain performance requirements or perform as intended, we may have to accept reduced charter rates or we may not be able to charter the converted FLNG vessel at all. Either of these possibilities would have a negative impact, which could be significant, on our cash flows and earnings.

Risks related to our revenues

Our operating revenue is dependent on a high customer concentration wherein a loss of any of our customers could have an adverse effect on our earnings and cashflows.

On January 26, 2022, Golar and Cool Co entered into a share purchase agreement (the “Vessel SPA”) under which Cool Co acquired eight modern Tri-Fuel Diesel Electric (“TFDE”) LNG vessels, namely the Golar Seal, Golar Crystal, Golar Bear, Golar Frost, Golar Glacier, Golar Snow, Golar Kelvin, Golar Ice and Cool Pool Limited, the fleet's commercial management company (the “Disposal Group”), from Golar. Following the completion of the transactions contemplated under Vessel SPA, our future revenues are now derived from a limited number of customers. The loss of a key customer or a substantial decline in the amount of services requested by a key customer, or the inability of a customer to pay for our services, could have a material adverse effect on our earnings and financial condition. We could lose a customer or the benefits of a contract if:

the customer fails to make payments because of its financial inability, disagreements with us or otherwise;
we breach the relevant contract and the customer exercises certain rights to terminate the contract;
the customer terminates the contract because we fail to deliver the vessel or service within a fixed period of time, the vessel is lost or damaged beyond repair or prolonged periods of off-hire, or we default under the contract;
the customer terminates the contract due to prolonged FM affecting the customer, including damage to or destruction of relevant facilities, war or geopolitical unrest preventing us from performing services for that customer; or
the customer becomes subject to sanction laws which directly or indirectly prohibit our ability to lawfully charter our vessel to such customer.

If we lose a key customer or if a customer exercises its right to terminate the charter, we may be unable to acquire an adequate replacement which could have a material adverse effect on our earnings and financial condition.

Golar Hilli LLC may not result in anticipated profitability or generate sufficient cash flow to justify our investment.

In July 2018, we, Keppel and Black & Veatch Corporation (“B&V”) completed the sale of 50% of the common units in Golar Hilli LLC (“Hilli LLC”), the disponent owner of the Hilli, to Golar Partners. However, we still hold a significant portion of the outstanding ownership interests in Hilli LLC. The retained interests expose us to risks that we may:

fail to obtain the benefits of the Liquefication Tolling Agreement (the “LTA”) if Perenco Cameroon S.A. (“Perenco”) and Société Nationale des Hydrocarbures (“SNH”) (together the “Customer”) exercises certain rights to terminate the charter upon the occurrence of specified events of default;
fail to obtain the benefits of the LTA if the Customer fails to make payments under the LTA because of its financial inability, disagreements with us or otherwise;
incur or assume unanticipated liabilities, losses or costs;
be required to pay damages to the Customer or suffer a reduction in the tolling fee in the event that the Hilli fails to perform to certain specifications;
incur other significant charges, such as asset devaluation or restructuring charges; or
be unable to re-charter the Hilli on another long-term charter at the end of the LTA.
4


We cannot guarantee that full utilization of the full capacity of Hilli will occur or, if achieved, continues.

In July 2021, we signed an agreement with the Customer to increase the utilization of Hilli by 0.2 million tons of LNG, commencing in January 2022, from base capacity of 1.2 million tons. The Customer was also granted an option to increase capacity utilization of Hilli by up to 0.4 million tons of LNG per year from January 2023 through to the end of the current contract term in 2026, which must be declared by the Customer in July 2022. The remaining capacity of the Hilli is not yet contracted.

Even if we were able to contract for utilization of the full capacity of the Hilli, we cannot guarantee that the full utilization would continue for any extended period. If we are unable to achieve utilization of full capacity, or to maintain utilization of full capacity in the future, such inability could have a significant effect on our earnings and financial condition.

We are subject to certain risks with respect to our contractual counterparties, and failure of such counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.

We have entered into agreements for the provision of certain technical, crew, commercial, corporate secretarial and transition services and have subcontracted the provision of certain services to external parties. Such agreements subject us to subcontractor counterparty risks. The ability of each of our subcontractor counterparty to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the overall financial condition of our subcontractor counterparty, the condition of the maritime and offshore industries and work stoppages or other labor disturbances. Should our subcontractor counterparty fail to honor its obligations under agreements with us, we could sustain significant losses, which could have a material adverse effect on our business, reputation, financial condition, results of operations and cash flow.

Risks related to our investments

Exposure to price volatility of our investment in listed equity securities could adversely affect our financial results.

Upon completion of the disposal of our equity investment in Hygo, we received 18.6 million shares of NFE Class A common stock (“NFE common stock”) and $50.0 million in cash as purchase considerations. Should the price of our NFE common stock decline materially from the share price at closing of the Hygo merger, our cash flows, financial condition and results of operations could be adversely affected.

Our equity investment in Avenir may not result in anticipated profitability to justify our investment.

As of December 31, 2021, we invested $42.8 million in Avenir, a joint venture with Stolt-Nielsen Ltd (“Stolt Nielsen”) (an entity affiliated with our director Niels Stolt Nielsen) and Höegh LNG Holdings Ltd (“Höegh”) for the pursuit of opportunities in small-scale LNG. The value of our investment and the income generated from our investment are subject to a variety of risks, including, among others, the inability of the joint venture partners to successfully work together in the shared management of Avenir, inability of Avenir to identify and enter into appropriate projects, inability of Avenir to obtain sufficient financing for any project it identifies, failure of small-scale LNG projects that Avenir has invested in, and other industry, regulatory, economic and political risks impacting Avenir's operations.

Our equity investment in Cool Co is subject to certain risks related to the LNG spot market.

On the completion of the transactions contemplated under the Cool Co Vessel SPA, we kept a 31.3% shareholding in Cool Co. Given the limited operating history of Cool Co, which may not be sufficient for a potential charterers to evaluate the viability of the company's business, it may be difficult for Cool Co to induce new customers. If Cool Co is not able to compete successfully and win new contracts, our earnings through our equity pick up of the results of Cool Co, could be adversely affected. A sustained decline in charter or spot rates or a failure by Cool Co to successfully charter its participating vessels could have a material adverse effect on our results of operations and Cool Co's ability to meet its financing obligations.







5


Risks related to the financing of our business

We may not be able to obtain new financing, to meet our obligations as they fall due or to fund our growth or our future capital expenditures, which could negatively impact our results of operations, financial condition and ability to pay dividends.

In order to fund future projects, increased working capital levels or other capital expenditures, we may be required to use cash from operations, incur additional borrowings or raise capital through the sale of debt or additional equity securities. Our ability to do so may be limited by our financial condition at the time of such financing or offering, as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain funds for future capital expenditures could impact our results of operations, financial condition and our ability to pay dividends. Furthermore, our ability to access capital, the overall economic conditions and our ability to secure charters on a timely basis could limit our ability to fund our growth plans and capital expenditures. If we are successful in issuing equity in order to raise capital, the issuance of additional equity securities would dilute shareholders' equity interest in us and reduce any pro rata dividend payments without a commensurate increase in cash allocated to dividends, if any. Even if we are successful in obtaining bank financing, paying debt service would limit cash available for working capital and increasing our indebtedness could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.

As a result of concerns about the stability of financial markets generally, and the solvency of counterparties, the availability and cost of obtaining money from the public and private equity and debt markets has become more difficult. Many lenders have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at all or on terms similar to current debt, and reduced, and in some cases ceased, to provide funding to borrowers and other market participants, including equity and debt investors, and some have been unwilling to invest on attractive terms or even at all. Due to these factors, we cannot be certain that financing will be available if needed and to the extent required, or that we will be able to refinance our existing and future credit facilities, on acceptable terms or at all.

We guarantee certain indebtedness of our affiliates and external parties. If certain of our affiliates and/or external parties are unable to service their debt requirements or comply with certain provisions contained in their loan agreements, this may have a material adverse effect on us.

We entered into certain agreements to provide stand-ready guarantees to certain banks in connection with, commercial bank indebtedness, charter agreements and certain taxes losses, claims, damages or liabilities imposed by governmental authorities of our affiliates and external parties, including Golar Partners, Hygo and Cool Co. Failure by any of our affiliates and/or external parties to service their debt requirements and comply with any provisions contained in their loan agreements or the charter agreements, including paying scheduled installments and complying with certain financial covenants, may lead to an event of default under the related loan or charter agreements. In such case, we would need to satisfy the obligations or indemnify the losses of the respective affiliate and/or external party. Additionally, if a default occurs under the debt agreements of our affiliated companies and/or external parties, the lenders could accelerate the outstanding borrowings and declare all amounts outstanding due and payable. In this case, if such entities are unable to obtain a waiver or an amendment to the applicable provisions of the debt agreements, or do not have enough cash on hand to repay the outstanding borrowings, the lenders may, among other things, foreclose their liens on the respective assets, or seek repayment of the loan from such entities or from us under the guarantee.

In addition, certain of our debt agreements contain cross-default provisions that may be triggered if the entities described above default under the terms of certain of their debt agreements. In the event of a default by such entities and the refusal of a lender or lessor to grant or extend a waiver, as applicable, the lenders under certain of our debt agreements could determine that we are in default under those debt agreements even if the lenders have waived covenant defaults of such entities under the respective agreements. Such cross-defaults could result in the acceleration of the maturity of the debt under our agreements and our lenders may foreclose upon any collateral securing that debt, including our vessels units and other assets, even if such default was subsequently cured. In the event of such acceleration and foreclosure, we may not have sufficient funds or other assets to satisfy all of our obligations. Further, such acceleration and foreclosure and the results thereof may reduce our ability to obtain future credit from certain lenders.

The occurrence of any of the events described above would have a material adverse effect on our business, results of operations and financial condition, would significantly reduce our ability or make us unable to pay dividends to our shareholders for so long as such default is continuing, and may impair our ability to continue as a going concern.


6


Most of our financing agreements are secured by our vessels and contain operating and financial restrictions and other covenants that may restrict our business, financing activities and ability to make cash distributions to our shareholders.

Most of our obligations are secured by certain of our vessels and guaranteed by our subsidiaries holding the interests in our vessels. Our loan agreements impose, and future financial obligations may impose, operating and financial restrictions on us. These restrictions may require the consent of our lenders, or may prevent or otherwise limit our ability to, among other things: merge into, or consolidate with, any other entity or sell, or otherwise dispose of, all or substantially all of our assets; make or pay equity distributions; incur additional indebtedness; incur or make any capital expenditures; materially amend, or terminate, any of our current charter contracts or management agreements; or charter our vessels.

Our loan agreements and lease financing arrangements also require us to maintain specific financial ratios, including minimum amounts of unrestricted cash, minimum ratios of current assets to current liabilities (excluding but not limited to the current portion of long-term debt, VIE balances), minimum levels of stockholders’ equity and maximum loan amounts to value. If we were to fail to maintain these levels and ratios without obtaining a waiver of covenant compliance or modification to our covenants, we would be in default of our loans and lease financing agreements, which, unless waived by our lenders, could provide our lenders with the right to require us to increase the minimum value held by us under our equity and liquidity covenants, increase our interest payments, pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet or reclassify our indebtedness as current liabilities and could allow our lenders to accelerate our indebtedness and foreclose their liens on our vessels, which could result in the loss of our vessels. If our indebtedness is accelerated, we may not be able to refinance our debt or obtain new financing, which would impair our ability to continue to conduct our business.

Events beyond our control, including changes in the economic and business conditions in the shipping industry in which we operate, interest rate developments, changes in the funding costs of our banks, changes in vessel earnings and asset valuations, outbreaks of epidemic and pandemic of diseases and war or geopolitical unrest, may affect our ability to comply with these financial covenants. We cannot provide any assurance that we will continue to meet these ratios or satisfy our financial or other covenants or that our lenders will waive any failure to do so.

NFE has agreed to indemnify us pursuant to the Golar Partners and Hygo Omnibus Agreements. The inability of NFE to satisfy its indemnity obligations to us could have a material adverse effect on our financial condition and results of operations.

Pursuant to the Golar Partners and Hygo Omnibus Agreements, we are indemnified by NFE for certain losses we may incur in connection with providing guarantees and counter indemnities under certain contracts covered by the Golar Partners and Hygo Omnibus Agreements.

NFE’s ability to make payments to us under the Golar Partners Omnibus Agreement and the Hygo Omnibus Agreement may be affected by events beyond either of the control of NFE or us, including prevailing economic, financial, geopolitical and industry conditions. If NFE is unable to meet its indemnification obligations to us under the Golar Partners Omnibus Agreement or the Hygo Omnibus Agreement, our financial condition, results of operations and ability to make cash distributions to shareholders could be materially adversely affected.

If the Hilli LC is not extended, the earnings and financial condition of Hilli Corp could suffer.

Pursuant to the terms of the LTA, Golar obtained a LC issued by a financial institution that guarantees certain payments Hilli Corp, a wholly owned subsidiary, is required to make under the LTA. The LC was set to expire on December 31, 2019, but it automatically extends for successive one-year periods until the tenth anniversary of the acceptance of the Hilli to perform the agreed services for the project, unless the financial institution elects to not extend the LC. The financial institution may elect to not extend the LC by giving notice at least ninety days prior to December 31 in any subsequent year. If the LC (i) ceases to be in effect or (ii) the financial institution elects to not extend it, unless replacement security for payment is provided within a certain time, then the LTA may be terminated and Hilli Corp may be liable for a termination fee of up to $125 million. Accordingly, if the financial institution elects at some point in the future to not extend the LC, Hilli Corp's financial condition could be materially and adversely affected.

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We are exposed to volatility in LIBOR and the derivative contracts we have entered into to hedge our exposure to fluctuations in interest rates could result in higher than market interest rates and charges against our income.

LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. In March 2021, the UK Financial Conduct Authority, which regulates LIBOR, announced that it will cease the publication of LIBOR after December 31, 2021, except for certain tenors of U.S. dollar LIBOR which will cease publication after June 30, 2023. It is unclear whether an extension will be granted or new methods of calculating LIBOR will be established such that it continues to exist after the scheduled expiration dates, or if alternative rates will be adopted. Global regulators are working with the financial sector to transition away from the use of LIBOR and towards the adoption of alternative reference rates. The impact of such transition away from LIBOR could be significant for us because of our substantial indebtedness.

While the agreements governing our revolving facilities and secured term loan facilities provide for an alternate method of calculating interest rates if a LIBOR rate is unavailable, once LIBOR ceases to exist, there may be adverse impacts on the financial markets generally and interest rates on borrowings under our revolving facilities and secured term loan facilities may be materially adversely affected.

In addition, we may need to renegotiate certain LIBOR-based revolving credit facilities, term loan facilities, interest rate swaps and finance lease facilities, which could adversely impact our cost of debt. There can be no assurance that we will be able to modify existing documentation or renegotiate existing transactions before the discontinuation of U.S. dollar LIBOR tenors by June 30, 2023.

Servicing our debt agreements substantially limits our funds available for other purposes and our operational flexibility.

Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, regulatory, war or geopolitical unrest and other factors, some of which are beyond our control. If our operating income is not sufficient to service our indebtedness, we will be forced to take actions, such as reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We may not be able to effect any of these remedies on satisfactory terms, or at all. In addition, a lack of liquidity in the debt and equity markets could hinder our ability to refinance our debt or obtain additional financing on favorable terms in the future.

Our consolidated lessor VIEs, may enter into different financing arrangements, which could affect our financial results.

Following the sale and leaseback transactions we have entered into with certain affiliates of Chinese financial institutions that are determined to be lessor VIEs, where we are deemed to be the primary beneficiary, we are required by U.S. GAAP to consolidate these lessor VIEs into our financial results. Although consolidated into our results, we have no control over the funding arrangements negotiated by these lessor VIEs such as interest rates, maturity and repayment profiles. The funding arrangements negotiated by these lessor VIEs could adversely affect our financial accounting results.

As of April 14, 2022 and subsequent to the completion of the transactions contemplated under the Cool Co Vessel SPA, we have deconsolidated seven of our eight lessor VIEs. For additional detail refer to note 5 “Variable Interest Entities” and note 30 “Subsequent events” of our consolidated financial statements included herein.


Risks related to our operations

A cyber-attack could materially disrupt our business.

We rely on information technology systems and networks in our operations and the administration of our business. Cyber-attacks have increased in number and sophistication in recent years. Our operations could be targeted by individuals or groups seeking to sabotage or disrupt our information technology systems and networks, or to steal data. A successful cyber-attack could materially disrupt our operations, including the safety of our operations, or lead to unauthorized release of information or alteration of information on our systems. Any such attack or other breaches of our information technology systems could have a material adverse effect on our business and results of operations.
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A substantial increase in operating costs could materially and adversely affect our financial performance.

Our vessel operating expenses and dry-dock capital expenditures depends on a variety of factors, including crew costs, provisions, deck and engine stores and spares, lubricating oil, insurance, maintenance and repairs and shipyard costs, many of which are beyond our control and affect the entire shipping industry.

While we do not bear the cost of fuel under our time charters, fuel is a significant, if not the largest, expense in our operations when our vessels are operating under voyage charters, are idling during periods of commercial waiting time or when positioning or repositioning before or after a time charter. The price and supply of fuel is unpredictable and fluctuates based on events outside of our control, including, supply and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries and other oil and gas producers, war and unrest in oil and gas producing countries and regions, regional productions patterns and environmental concerns. Fuel costs may fluctuate significantly, and if costs rise, they could materially and adversely affect our results of operations.

Marine transportation and oil production are inherently risky and our operations face several industry risks and events which could cause damage or loss of a vessel, loss of life or environmental consequences that could harm our reputation and ongoing business operations.

Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, outbreaks of epidemic and pandemic diseases, acts of piracy, environmental accidents, bad weather, mechanical failures, grounding, fire, explosions and collisions, human error, national emergency and war and terrorism. Incidents such as these have historically affected companies in our industry, and such an event or accident involving any of our vessels could result in any of the following:

death or injury to persons, loss of property or environmental damage;
delays in the delivery of cargo;
the inability to complete scheduled engine overhauls, routine maintenance work, vessel inspections, certifications by class societies and management of equipment malfunctions;
loss of revenues from or termination of charter contracts;
governmental fines, penalties or restrictions on conducting business;
a government requisitioning for title or seizing our vessels (e.g. in a time of war or national emergency);
higher insurance rates; and
damage to our reputation and customer relationships generally.

Any of these circumstances or events could increase our costs or lower our revenues. In particular:

although we carry insurance, all risks may not be adequately insured against, and any claim may not be paid. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material;
if piracy attacks, military action or war results in regions in which our vessels are deployed being characterized as “war risk” zones by insurers or the Joint War Committee “war and strikes” listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain;
certain of our insurance coverage is maintained through mutual protection and indemnity associations and, as a member of such associations, we may be required to make additional payments over and above budgeted premiums if member claims exceed association reserves;
if our vessels suffer damage, they may need to be repaired. The costs of vessel repairs are unpredictable and can be substantial. We may have to pay repair costs that our insurance policies do not cover. The loss of earnings while these vessels are being repaired, as well as the actual cost of these repairs, would decrease our results of operations; and
if one of our vessels were involved in an accident with the potential risk of environmental contamination, the resulting media coverage could have a material adverse effect on our business, our results of operations and cash flows, weaken our financial condition and negatively affect our ability to pay distributions.

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Failure to comply with the U.S. Foreign Corrupt Practices Act, the UK Bribery Act and other anti-bribery legislation in other jurisdictions could result in fines, criminal penalties, contract terminations and an adverse effect on our business.

We may operate in several countries throughout the world, including countries known to have a reputation for corruption. We are committed to doing business in accordance with applicable anti-corruption laws and have adopted a code of business conduct and ethics which is consistent and in full compliance with the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), and the Bribery Act 2010 of the UK (“UK Bribery Act”). We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of such anti-corruption laws, including the FCPA and the UK Bribery Act. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties, curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

To effectively compete in some foreign jurisdictions, we utilize local agents and/or establish entities with local operators or strategic partners. All these activities may involve interaction by our agents with government officials. Even though some of our agents or partners may not themselves be subject to FCPA, the UK Bribery Act, or other anti-bribery laws to which we may be subjected to, if our agents or partners make improper payments to government officials or other persons in connection with engagements or partnerships with us, we could be investigated and potentially found liable for violation of such anti-bribery laws and could incur civil and criminal penalties and other sanctions, which could have a material adverse effect on our business and results of operations.

Vessel values may fluctuate substantially and, if these values are lower at a time when we are attempting to dispose of vessels, we may incur a loss.

Vessel values can fluctuate substantially over time due to several different factors, including:

prevailing economic and market conditions in the natural gas and energy markets;
a substantial or extended decline in demand for LNG;
increases in the supply of vessel capacity without a commensurate increase in demand;
the type, size and age of a vessel;
competition from more technologically advanced vessels; and
the cost of new buildings or retrofitting or modifying existing vessels, as a result of technological advances in vessel design or equipment, changes in applicable environmental or other regulations or standards, customer requirements or otherwise.

As our vessels age, the expenses associated with maintaining and operating them are expected to increase, which could have an adverse effect on our business and operations.

The carrying values of our vessels may not represent their fair market value at any point in time because the market prices of secondhand vessels tend to fluctuate with changes in charter rates and the cost of new build vessels. Our vessels are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any impairment charges incurred as a result of declines in charter rates could negatively affect our business, financial condition, operating results or the trading price of our common shares.

Please refer to “Item 5. Operating and Financial Review and Prospects B. Liquidity and Capital Resources-Critical Accounting Policies and Estimates-Vessel Market Values” for further information.

We will have to make additional contributions to our pension scheme because it is underfunded.

We provide pension plans for certain of our current and former marine employees. Members do not contribute to the pension scheme plans and these pension schemes are closed to any new members. As of December 31, 2021, one of the plans is underfunded by $34.8 million. We may need to increase our contributions in order to meet the scheme's liabilities as they fall due, or, to reduce the deficit. Such contributions could have a material and adverse effect on our cash flows and financial condition.

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We are exposed to U.S. dollar and foreign currency fluctuations and devaluations that could harm our reported revenue and results of operations.

Our principal currency for our operations and financing is the U.S. dollar. We generate most of our revenues in the U.S. dollar. Apart from the U.S. dollar, we incur operating and administrative expenses in multiple currencies. Due to a portion of our expenses being incurred in currencies other than the U.S. dollar, our expenses may, from time to time, increase relative to our revenues as a result of fluctuations in exchange rates, particularly between the U.S. dollar and the Euro, the British Pound, and the Norwegian Kroner, which could affect our earnings. We use financial derivatives to hedge some of our currency exposures. Our use of financial derivatives involves certain risks, including the risk that losses on a hedged position could exceed the nominal amount invested in the instrument and the risk that the counterparty to the derivative transaction may be unable or unwilling to satisfy its contractual obligations, which could have an adverse effect on our results.

We may be unable to attract and retain key personnel, which may negatively impact the effectiveness of our management and our results of operations.

Our success depends, to a significant extent, upon the abilities and the efforts of our senior executives and certain key employees. While we believe that we have an experienced team, the loss or unavailability of one or more of our senior executives and/or the key employees for any extended period of time could have an adverse effect on our business and results of operations.

We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on us.

We may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties and other litigation that arises in the ordinary course of our business.

Although we always intend to defend such matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent, which may have a material adverse effect on our financial condition. Please read “Item 8 Financial Information-Legal Proceedings and Claims”


Risks related to our industry

Our results of operations and financial condition depend on demand for LNG, LNG carriers, FSRUs and FLNGs.

Our results of operations and financial condition depend on continued world and regional demand for LNG, LNG carriers, FSRUs and FLNGs, which could be negatively affected by several factors, including but not limited to:

price and availability of natural gas, crude oil and petroleum products;
increases in the cost of natural gas derived from LNG relative to the cost of natural gas;
decreases in the cost of, or increases in the demand for, conventional land-based regasification and liquefaction systems, which could occur if providers or users of regasification or liquefaction services seek greater economies of scale than FSRUs or FLNGs can provide, or if the economic, regulatory or political challenges associated with land-based activities improve;
further development of, or decreases in the cost of, alternative technologies for vessel-based LNG regasification or liquefaction;
increases in the production levels of low-cost natural gas in domestic natural gas consuming markets, which could further depress prices for natural gas in those markets and make LNG uneconomical;
increases in the production of natural gas in areas linked by pipelines to consuming areas, the extension of existing, or the development of new, pipeline systems in markets we may serve, or the conversion of existing non-natural gas pipelines to natural gas pipelines in those markets;
negative global or regional economic or political conditions, particularly in LNG-consuming regions, could reduce energy consumption or its growth;
geopolitical unrest or war;
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decreases in the consumption of natural gas due to increases in its price relative to other energy sources or other factors making consumption of natural gas less attractive;
any significant explosion, spill or other incident involving an LNG facility or carrier, conventional land-based regasification or liquefaction system, or FSRU or FLNG;
new taxes or regulations affecting LNG production or liquefaction that make LNG production less attractive;
a significant increase in the number of LNG carriers, FSRUs or FLNGs available, whether by a reduction in the scrapping of existing vessels or the increase in construction of vessels;
increases in interest rates or other events that may affect the availability of sufficient financing for LNG projects on commercially reasonable terms;
the inability of project owners or operators to obtain governmental approvals to construct or operate LNG facilities;
local community resistance to proposed or existing LNG facilities based on safety, environmental or security concerns;
labor or political unrest affecting existing or proposed areas of LNG production, liquefaction and regasification; and
availability of new, alternative energy sources, including compressed natural gas.

Reduced demand for LNG or LNG liquefaction, storage, shipping or regasification, or any reduction or limitation in LNG production capacity, could have a material adverse effect on prevailing charter rates or the market value of our vessels, which could have a material adverse effect on our results of operations and financial condition.

Maritime claimants could arrest our vessels, which could interrupt our cash flow.

If we are in default on certain kinds of obligations, such as those to our lenders, crew members, suppliers of goods and services to our vessels or shippers of cargo, these parties may be entitled to a maritime lien against one or more of our vessels. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. Under some of our present charters, if the vessel is arrested or detained (for as few as 14 days in the case of one of our charters) because of a claim against us, we may be in default of our charter and the charterer may terminate the charter. This would negatively impact our revenues and reduce our cash available for distribution to shareholders.

Political, governmental and economic instability and sanctions or embargoes imposed by the U.S. or other governmental authorities could adversely affect our business.

Although we conduct most of our operations outside of the U.S., the operations of certain of our customers may be adversely affected by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in, and/or are pursuing projects in areas of the world that is likely to be adversely impacted by the effects of political conflicts, including the current political instability in Ukraine, Cameroon, the Middle East and the South China Sea region, terrorist or other attacks, and war (or threatened war) or international hostilities. These uncertainties could also adversely affect our ability to obtain additional financing on terms acceptable to us or at all. Any of these occurrences could have a material adverse impact on our operating results.

Political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region and most recently in the Black Sea in connection with the conflict between Russia and Ukraine. This conflict has resulted in several countries and international organizations, such as the U.S., the UK and the EU, imposing trade and investment sanctions against Russia which are expected to adversely affect the global economy. While our vessels and their respective charterers are not directly impacted by these measures, these factors could also increase our costs of conducting our business, particularly crew, insurance and security costs, and prevent or restrict us from obtaining insurance coverage, all of which have may have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, tariffs, trade embargoes and other economic sanctions by the U.S. or other countries, against countries in which we operate, or to which we trade, or to which we or any of our customers, joint venture partners or business partners become subjected to, could harm our business. We could be subjected to monetary fines, penalties, or other sanctions, and our reputation and the market for our common shares could be adversely affected if we were found to be in a violation of sanctions or embargo laws.

Further, governments may turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay any cash distributions to our shareholders.
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Our operations are subject to extensive and changing laws, regulations and reporting requirements, which may have an adverse effect on our business.

Our operations are affected by extensive and changing laws, regulations and reporting requirements that could create greater reporting obligations and compliance requirements. Whilst the regulatory environment continues to evolve, we have invested in, and intend to continue to invest in, reasonably necessary resources to comply with evolving standards and maintain high standards of corporate governance and public disclosure. Compliance with and limitations imposed by these laws, regulations, treaties, conventions, and other requirements, and any future additions or changes to such environmental, health, safety and maritime conduct laws or requirements applicable to international and national maritime trade, may increase our costs and/or limit our operations and have an adverse effect on our business. Failure to comply can result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations, including, in certain instances, seizure or detention of our vessels.

Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

An increasing concern for, and focus on climate change has promoted extensive existing and proposed international, national and local regulations intended to reduce greenhouse gas emissions (including from various jurisdictions and the International Maritime Organization (the “IMO”). These regulatory measures may include the adoption of cap-and-trade regimes, carbon taxes, increased efficiency standards and incentives or mandates for renewable energy. Compliance with changes in laws and regulations relating to climate change could increase our costs of operating and maintaining our vessels and could require us to make significant financial expenditures that we cannot predict with certainty at this time.

Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also influence demand for our services. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.

Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us, especially given the highly focused and specific trade of liquefaction, transportation and regasification of LNG in which we are engaged. If we do not meet these standards, our business and/or our ability to access capital could be harmed.

Additionally, certain investors and lenders may exclude companies engaged in the liquefaction, transportation and regasification of LNG, such as us, from their investing portfolios altogether due to ESG factors. These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements. The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.

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Risks related to our common shares

The declaration and payment of dividends is at the discretion of our board of directors.

The declaration and payment of dividends to holders of our common shares will be at the discretion of our board of directors in accordance with applicable law. In determining whether to declare and pay a dividend, our board of directors will take into account various factors, including actual results of operations, liquidity and financial condition, net cash provided by operating activities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors deem relevant. There can be no assurance that we will continue to pay dividends in amounts or on a basis consistent with prior distributions to our investors, if at all. Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries and our ability to receive distributions from our subsidiaries may be limited by the financing agreements to which they are subject.

If we fail to meet the expectations of analysts or investors, our share price could decline substantially.

In some quarters, our results may be below analysts’ or investors’ expectations. If this occurs, the price of our common stock could decline. Important factors that could cause our revenue and operating results to fluctuate from quarter to quarter or year on year, include, but are not limited to:

prevailing economic and market conditions in the natural gas and energy markets;
negative global or regional economic or political conditions, particularly in LNG-consuming regions, which could reduce energy consumption or its growth;
declines in demand for LNG or the services of LNG carriers, FSRUs or FLNGs;
increases in the supply of LNG carrier capacity operating in the spot market or the supply of FSRUs or FLNGs;
marine disasters, war, piracy or terrorism, environmental accidents, or inclement weather conditions;
mechanical failures or accidents involving any of our vessels; and
dry-dock scheduling and capital expenditures.

Most of these factors are not within our control, and the occurrence of one or more of them may cause our operating results to vary widely.

Our common share price may be highly volatile and future sales of our common shares could cause the market price of our common shares to decline and could lead to a loss of all or part of a shareholder's investment.

The market price of our common shares has fluctuated widely since they began trading on the NASDAQ Global Select Market. We cannot assure you that an active and liquid public market for our common shares will continue. Over the last few years, the stock market has experienced price and volume fluctuations. From January 1, 2021, the closing market price of our common shares on Nasdaq ranged from a low of $10.30 in August 2021 to a high of $26.36 per share in April 2022.

The market price of our common shares may experience extreme volatility in response to many factors, including factors that may be unrelated to our operating performance or prospects such as actual or anticipated fluctuations in our quarterly or annual results and those of other public companies in our industry, the suspension of our dividend payments, mergers and strategic alliances in the shipping industry, market conditions in the LNG shipping industry, developments in our FLNG investments, shortfalls in our operating results from levels forecast by securities analysts, announcements concerning us or our competitors, business interruptions, the general state of the securities market, and other factors, many of which are beyond our control.

Furthermore, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. Additionally, sales of a substantial number of our common shares in the public market, or the perception that these sales could occur, may depress the market price for our common shares. These sales could also impair our ability to raise additional capital through the sale of our equity securities in the future. Therefore, there can be no guarantee that our stock price will remain at current prices, and we cannot assure our shareholders that they will be able to sell any of our common shares that they may have purchased at a price greater than or equal to the original purchase price.

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We may issue additional common shares or other equity securities without our shareholders’ approval, which would dilute their ownership interests and may depress the market price of our common shares.

We may issue additional common shares or other equity securities in the future in connection with, among other things, vessel conversions, future vessel acquisitions, repayment of outstanding indebtedness or our equity incentive plan, in each case without shareholder approval in several circumstances.

Our issuance of additional common shares or other equity securities would have the following effects:

our existing shareholders’ proportionate ownership interest in us will decrease;
the amount of cash available for dividends payable on our common shares may decrease;
the relative voting strength of each previously outstanding common share may be diminished; and
the market price of our common shares may decline.

Because we are a Bermuda corporation, our shareholders may have less recourse against us or our directors than shareholders of a U.S. company have against the directors of that U.S. Company.

Because we are a Bermuda company, the rights of holders of our common shares will be governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders in other jurisdictions, including with respect to, among other things, rights related to interested directors, amalgamations, mergers and acquisitions, takeovers, the exculpation and indemnification of directors and shareholder lawsuits.

Among these differences is a Bermuda law provision that permits a company to exempt a director from liability for any negligence, default, or breach of a fiduciary duty except for liability resulting directly from that director’s fraud or dishonesty.  Our bye-laws provide that no director or officer shall be liable to us or our shareholders unless the director’s or officer’s liability results from that person’s fraud or dishonesty. Our bye-laws also require us to indemnify a director or officer against any losses incurred by that director or officer resulting from their negligence or breach of duty, except where such losses are the result of fraud or dishonesty. Accordingly, we carry directors’ and officers’ insurance to protect against such a risk.

In addition, under Bermuda law, the directors of a Bermuda company owe their duties to that company and not to the shareholders. Bermuda law does not, generally, permit shareholders of a Bermuda company to bring an action for a wrongdoing against the company or its directors, but rather the company itself is generally the proper plaintiff in an action against the directors for a breach of their fiduciary duties. Moreover, class actions and derivative actions are generally not available to shareholders under Bermuda law. These provisions of Bermuda law and our bye-laws, as well as other provisions not discussed here, may differ from the law of jurisdictions with which shareholders may be more familiar and may substantially limit or prohibit a shareholder's ability to bring suit against our directors or in the name of the company. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.

It's also worth noting that under Bermuda law, our directors and officers are required to disclose to our board any material interests they have in any contract entered into by our company or any of its subsidiaries with third parties. Our directors and officers are also required to disclose their material interests in any corporation or other entity which is party to a material contract with our company or any of its subsidiaries. A director who has disclosed his or her interests in accordance with Bermuda law may participate in any meeting of our board, and may vote on the approval of a material contract, notwithstanding that he or she has a material interest.

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Because our offices and most of our assets are outside the U.S., our shareholders may not be able to bring a suit against us, or enforce a judgment obtained against us in the United States.

We, and most of our subsidiaries, are incorporated in jurisdictions outside the U.S. and substantially all of our assets and those of our subsidiaries are located outside the U.S. In addition, most of our directors and officers are non-residents of the U.S., and all or a substantial portion of the assets of these non-residents are located outside the U.S. As a result, it may be difficult or impossible for U.S. investors to serve process within the U.S. upon us, our subsidiaries, or our directors and officers, or to enforce a judgment against us for civil liabilities in U.S. courts. In addition, you should not assume that courts in the countries in which we or our subsidiaries are incorporated or where our or our subsidiaries’ assets are located would enforce judgments of U.S. courts obtained in actions against us or our subsidiaries based upon the civil liability provisions of applicable U.S. federal and state securities laws, or would enforce, in original actions, liabilities against us or our subsidiaries based on those laws.


Risks related to tax

As a Bermuda exempted company incorporated under Bermuda law with subsidiaries in the Marshall Islands and other offshore jurisdiction, our operations may be subject to economic substance requirements.

On December 5, 2017, following an assessment of the tax policies of various countries by the Code of Conduct Group for Business Taxation of the European Union (the “COCG”), the Council of the European Union (the “Council”) approved and published Council conclusions containing a list of “non-cooperative jurisdictions” for tax purposes. On March 12, 2019, the Council adopted a revised list of non-cooperative jurisdictions (the “2019 Conclusions”). In the 2019 Conclusions, Bermuda and the Republic of the Marshall Islands, among others, were placed by the E.U. on its list of non-cooperative jurisdictions for tax purposes for failing to implement certain commitments previously made to the E.U. by the agreed deadline. However, it was announced by the Council on May 17, 2019 and on October 10, 2019 that Bermuda and the Marshall Islands, respectively, had been removed from the list of non-cooperative tax jurisdictions. The E.U. member states have agreed upon a set of measures, which they can choose to apply against the listed countries, including increased monitoring and audits, withholding taxes, special documentation requirements and anti-abuse provisions. The European Commission has stated it will continue to support member states’ efforts to develop a more coordinated approach to sanctions for the listed countries, E.U. legislation prohibits E.U. funds from being channelled or transited through entities in non-cooperative jurisdictions.

We are a Bermuda exempted company incorporated under Bermuda law with principal executive offices in Bermuda. Certain of our subsidiaries are Marshall Islands entities. Both Bermuda and the Marshall Islands have enacted, economic substance laws and regulations with which we may be obligated to comply. For example, on December 17, 2018, the House of Assembly of Bermuda passed the Economic Substance Act 2018 of Bermuda (the “Economic Substance Act”), which became operative on December 31, 2018, along with the Economic Substance Regulations 2018 of Bermuda. The Economic Substance Act requires each registered entity to maintain a substantial economic presence in Bermuda and provides that a registered entity that carries on a relevant activity must comply with economic substance requirements set out in the legislation. Regulations were also adopted in the Marshall Islands, through Economic Substance Regulations 2018 which came into force in January 2019, and with Guidance Notes being published in October 2019, requiring certain entities that carry out activities to comply with an economic substance test and satisfy certain reporting obligations, beginning with the financial period which ended in 2020.

If we fail to comply with our obligations under this legislation, as it may be amended from time to time, or any similar or supplemental law applicable to us in these or any other jurisdictions, we could be subject to financial penalties and spontaneous disclosure of information to foreign tax officials, or could be removed from the register of companies, in related jurisdictions. Any of the foregoing could be disruptive to our business and could have a material adverse effect on our business, financial conditions and operating results.

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A change in tax laws in any country in which we operate could adversely affect us.

Tax laws, treaties and regulations are highly complex and subject to interpretation. Consequently, we and our subsidiaries are subject to changing laws, treaties and regulations in and between the countries in which we operate. Our tax expense is based on our interpretation of the tax laws in effect at the time the expense was incurred. A change in tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our earnings. Such changes may include measures enacted in response to the ongoing initiatives in relation to fiscal legislation at an international level such as the Action Plan on Base Erosion and Profit Shifting of the Organization for Economic Co-Operation and Development.

We could be treated as or become a PFIC, which could have adverse United States federal income tax consequences to U.S. shareholders.

A foreign corporation will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes if either (1) at least 75% of its gross income during the taxable year consists of certain types of “passive income” or (2) at least 50% of the average value of the corporation's assets during such taxable year produce or are held for the production of those types of “passive income.” For purposes of these tests, “passive income” includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.” U.S. shareholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC and the gain, if any, they derive from the sale or other disposition of their shares in the PFIC.

We intend to treat the gross income we derive or are deemed to derive from our time chartering activities as services income, rather than rental income. Accordingly, we believe that our income from our time chartering activities does not constitute “passive income,” and the assets that we own and operate in connection with the production of that income do not constitute passive assets.

We believe there is substantial legal authority supporting our position consisting of case law and United States Internal Revenue Service, or IRS, pronouncements concerning the characterization of income derived from time charters and voyage charters as services income for other tax purposes. However, we note that there is also authority which characterizes time charter income as rental income rather than services income for other tax purposes. Accordingly, no assurance can be given that the IRS or a court of law will accept our position. 

Based on the foregoing, we believe that we were not a PFIC with respect to any prior taxable year. However, there can be no assurance that we will not become a PFIC for any future taxable year as a result of changes in our operations or assets.

If we are or have been a PFIC for any taxable year, our U.S. shareholders will face adverse U.S. tax consequences and certain information reporting requirements. Under the PFIC rules, unless those shareholders make a certain election available (which election could itself have adverse consequences for such shareholders), such shareholders would be liable to pay U.S. federal income tax at the then prevailing income tax rates on ordinary income plus interest upon excess distributions and upon any gain from the disposition of our common shares, as if the excess distribution or gain had been recognized ratably over the shareholder's holding period of our common shares. Please see the section of this annual report entitled “Taxation” under “Item 10. Additional Information E. Taxation” for a more comprehensive discussion of the U.S. federal income tax consequences if we were to be treated as a PFIC.

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We may have to pay tax on U.S. source income, which would reduce our earnings.

Under the U.S. Internal Revenue Code of 1986 as amended, or the Code, 50% of the gross shipping income of a vessel owning or chartering corporation, such as ourselves and our subsidiaries, that is attributable to transportation that begins or ends, but that does not both begin and end, in the U.S., may be subject to a 4% U.S. federal income tax without allowance for deduction, unless that corporation qualifies for exemption from tax under Section 883 of the Code and the applicable Treasury Regulations recently promulgated thereunder.

We expect that we and each of our subsidiaries will qualify for this statutory tax exemption and we will take this position for U.S. federal income tax return reporting purposes. However, there are factual circumstances beyond our control that could cause us to lose the benefit of this tax exemption and thereby become subject to U.S. federal income tax on our U.S. source income. Therefore, we can give no assurances that this tax exemption will apply to us or to any of our subsidiaries.

If we or our subsidiaries are not entitled to exemption under Section 883 of the Code for any taxable year, we or our subsidiaries could be subject for those years to an effective 4% U.S. federal income tax on the gross shipping income we or our subsidiaries derive during the year that are attributable to the transport of cargoes to or from the United States. The imposition of this tax would have a negative effect on our business and would result in decreased earnings available for distribution to our shareholders. Please see “Item 10. Additional Information-E. Taxation” for further information.

We may become subject to taxation in Bermuda which would negatively affect our results.

At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda. We cannot assure you that a future Minister would honor that assurance, which is not legally binding, or that after such date we would not be subject to any such tax. If we were to become subject to taxation in Bermuda, our results of operations could be adversely affected.

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ITEM 4.  INFORMATION ON THE COMPANY

A.  History and Development of the Company

Overview

Golar LNG Limited designs, builds, owns and operates marine infrastructure for the liquefaction and regasification of LNG. Following the disposal of our investments in former affiliates Golar Partners and Hygo in April 2021 and the recent business separation of our eight modern TFDE LNG vessels into Cool Co in April 2022, we have narrowed our focus on pursuing and increasing our portfolio of FLNG projects.

We believe that natural gas has a critical role to play in providing cleaner energy for many years to come. Our mission is to be recognized as a learning organization with an outstanding reputation for safe, reliable and cost-effective operations; to employ and develop talented people who can see the impact of what they do; to develop a pipeline of new FLNG infrastructure opportunities and convert the best opportunities into world class projects; and to be a great business partner, where combining skills and resources make a big difference.

Our strategy is to offer resource holders a low-cost quick delivering solution to monetize stranded gas reserves. Our unique industry leading FLNG technology allows stranded and associated gas resource holders, developers and customers to enter the LNG business and occupy a legitimate space alongside the largest resource holders, major oil companies and world-scale LNG buyers. For established LNG industry participants, the prospect of our low-cost, low-risk, fast-track, small footprint FLNG solution provides a compelling alternative to traditional land-based projects. As one of the industry’s most innovative developers of floating terminals, Golar has produced more LNG from a floating facility than any other operator.

As of April 14, 2022, our fleet of vessels is comprised of one LNG carrier, one FSRU and two FLNGs (including the operational FLNG Hilli and the Gimi which is currently under conversion) and one FLNG conversion candidate vessel, the Gandria.

We are listed on Nasdaq under the ticker “GLNG”. We were incorporated under the name Golar LNG Limited as an exempted company under the Bermuda Companies Act of 1981 in the Islands of Bermuda on May 10, 2001 and maintain our principal executive headquarters at 2nd Floor, S.E. Pearman Building, 9 Par-la-Ville Road, Hamilton HM 11, Bermuda. Our telephone number at that address is +1 441 295 4705. Our principal administrative offices are located at The Zig Zag, 70 Victoria Street, London, SW1E 6SQ, United Kingdom and our telephone number at that address is +44 207 063 7900. The Commission maintains an internet site that contains reports, proxy and information statements, and other information that we file electronically with the Commission and this can be obtained from the Commission’s website at (http://www.sec.gov) or from the “SEC filings” tab in the “Investor Relations” section of our website (www.golarlng.com). Information contained on our website does not constitute part of this annual report.

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As of April 14, 2022, our existing investments and projects are as follows:

Our investments

a.New Fortress Energy (“NFE”)

In April 2021, we sold to NFE our outstanding interests in the common units and general partner of our former affiliates, Golar Partners for $3.55 per unit (the “GMLP Merger”) and all of our outstanding shares in Hygo (the “Hygo Merger”). We received a total consideration of $80.8 million in cash for Golar's equity stake in GMLP. Concurrently, with the completion of the GMLP Merger, the incentive distribution rights (“IDRs”) of Golar Partners owned by us were cancelled and ceased to exist, and no consideration was paid to us. On the Hygo Merger, the purchase consideration included 18,627,451 shares of NFE common stock (representing 8.9% ownership at the time of closing) and $50 million in cash. In April 2022, we sold 6.2 million shares of NFE common stock raising net proceeds of $253.0 million, which is planned to be deployed for FLNG growth and general corporate purposes.

Furthermore, on completion of the GMLP Merger and the Hygo Merger, we entered into certain transition services agreements, corporate services agreements, ship management agreements and omnibus agreements with Golar Partners, Hygo and NFE. These agreements replaced the previous management and administrative services agreements, ship management agreements and guarantees that Golar provided to Golar Partners and Hygo.

b.Avenir

Avenir is a joint investment with Stolt-Nielsen, Höegh and us for the pursuit of opportunities in small-scale LNG, including the delivery of LNG to areas of stranded gas demand and the development of LNG bunkering services and supply to the transportation sector. During the private placement in 2018, we subscribed for 24.8 million shares, representing an investment of $24.8 million. In 2020, we injected a further $18.0 million and were issued additional shares at a par value of $1.00 per share, bringing our total capital contributions to $42.8 million, representing 23.5% ownership.

Avenir currently has four small-scale LNG newbuilds, one small-scale LNG carrier under construction and an LNG terminal and distribution facility in the Italian port of Oristano, Sardinia.

c.Cool Co

The objective of the formation of the Cool Co is to serve the transportation requirements of the LNG shipping market by providing customers with modern and flexible solutions to meet their shipping requirements. On January 26, 2022, Golar and Cool Co entered into a share purchase agreement (“the Vessel SPA”) under which Cool Co is acquiring eight modern TFDE LNG vessels, namely the Golar Seal, Golar Crystal, Golar Bear, Golar Frost, Golar Glacier, Golar Snow, Golar Kelvin, Golar Ice as well as the Cool Pool Limited, the fleet’s commercial management company (the Disposal Group), from Golar. The purchase price for each vessel was agreed at $145.0 million, subject to working capital and debt adjustments.

Following completion of the Vessel SPA, we now hold 31.25% share in Cool Co, while EPS Ventures Ltd is the largest shareholder at 37.50% and the remaining 31.25% held by a group of institutional and other investors.



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Our projects

d.     Gimi GTA Project

In February 2019, Golar entered into the LOA with BP for the charter of a FLNG unit, Gimi, to service the BP Greater Tortue Ahmeyim project for a 20-year period, and the Gimi was delivered to a shipyard in Singapore to commence her conversion. The Gimi will liquefy natural gas as part of the first phase of the Gimi GTA Project and will be located at an innovative nearshore hub on the Mauritania and Senegal maritime border. The Gimi is designed to produce an average of approximately 2.5 million tonnes of LNG per annum, with the total gas resources in the field estimated to be around 15 trillion cubic feet.

In April 2020, we announced the receipt of a written notification of a FM claim by BP under the LOA. The FM notice claimed that due to the global outbreak of COVID-19, BP was unable to be ready to receive the converted FLNG Gimi on the 2022 target connection date.

In October 2020, we agreed a revised project schedule with BP for the Gimi GTA Project which resulted in the original 2022 target connection date for the Gimi, to be extended by 11 months. Written notice was received from BP confirming that no FM event (as defined in the LOA) is ongoing. We have concluded discussions with both engineering, procurement and construction contractors and lending banks regarding the adjustment of the related construction and financing schedules, respectively, for the Gimi GTA Project to reflect these changes in the respective agreements. The Gimi conversion cost including financing cost is approximately $1.6 billion of which $700 million is funded by the Gimi debt facility.

As of April 14, 2022, the Gimi conversion is 82% technically complete.

e.     LNG Croatia
In March 2019, we entered into agreements with LNG Hrvatska d.o.o. (“LNG Hrvatska”) relating to the conversion and subsequent sale of the converted carrier LNG Croatia into a FSRU. In December 2020, we completed the conversion of LNG Croatia and sold the vessel for $193.3 million.

From January 1, 2021 our 10-year Operation and Maintenance Agreement (the “O&M Agreement”) in relation to the FSRU LNG Croatia with LNG Hrvatska commenced.

f.     Floating Ammonia Production, Carbon Capture, Green LNG and other emerging technologies

Golar’s internal “Green Team” continues to engage with and evaluate new technologies and partnerships to improve the efficiency of our LNG operations and develop solutions in the field of floating ammonia production, carbon capture, green LNG and hydrogen. For example, in November 2020 we entered into a collaboration agreement with B&V to research and, if appropriate, develop these technologies and released a thought leadership paper on the potential for floating ammonia production.

B.      Business Overview

In January 2021, following the board of directors' approvals of the GMLP Merger and Hygo Merger with NFE, we determined that our share of the net earnings/(losses) in our former affiliates, Golar Partners and Hygo and the respective carrying values of our equity accounted investments met the definitions of held for sale and discontinued operations and have consequently presented them as net income/(loss) from discontinued operations and assets held for sale, respectively. Concurrently, the disposal of our interest in Hygo signaled our exit from “Power” operations and we therefore ceased to consider the “Power” operations as a reportable segment.

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Management has concluded that we provide three distinct reportable segments as follows:

Shipping – We operate and subsequently charter out LNG carriers on fixed terms to customers. We own one LNG carrier and one FSRU, the Golar Tundra which is currently trading as an LNG carrier in the Cool Pool.
FLNG – We convert LNG carriers into FLNG vessels and subsequently charter them out to customers. We currently have one operational FLNG, the Hilli, one undergoing conversion, the Gimi, and one LNG carrier earmarked for FLNG conversion, the Gandria. We also have ready to implement designs for newbuild FLNGs of varying sizes.
Corporate and other - Related to our business activities of vessel management and administrative services. This segment also includes our corporate overhead costs.

Corporate and other segment

Golar Management, our wholly-owned subsidiary which has its offices in London, Oslo, Kuala Lumpur and Split, provides commercial, operational and technical support, crew management services and supervision and accounting and treasury services. Golar Management is compensated via management fees for the costs and expenses it incurs in connection with the provision of these services.

As of April 14, 2022, an overview of our assets and investments are as follows:

glng-20211231_g1.jpg
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Vessel NameYear of Delivery/Conversion Capacity Cubic MetersFlagTypeOwnershipCharterer/ Pool ArrangementCurrent Charter Expiration
Golar Arctic2003140,000Marshall IslandsLNGC Membrane100%Spot marketNot applicable
Golar Tundra (1)
2015170,000Marshall IslandsFSRU Membrane100%Pool arrangement2022
Hilli Episeyo (2)
20172.4 mtpaMarshall IslandsFLNG Moss-44.6% of the common units

-89.1% of each of the Series A and Series B
Perenco/SNH2026
Gimi
Conversion in progress2.45 mtpaMarshall IslandsFLNG Moss70%BP2043
Gandria (3)
Earmarked for conversion126,000 cubic metersMarshall IslandsMoss100%Not applicableNot applicable

(1)Vessels in the Cool Pool allow certain substitution rights which means that any vessel within the Cool Pool is interchangeable with another vessel of the same/similar technical specification and may not be considered to be dedicated to a particular charterer. Furthermore, pool earnings are aggregated and then allocated to the pool participants in accordance with the number of days each of their vessels are entered into the pool during the period.
(2)The Hilli is scheduled to provide liquefaction services until the earlier of (i) eight years from May 2018, the date the Customer accepted the Hilli, or (ii) the time of receipt and processing by the Hilli of 500 billion cubic feet of feed gas. The tolling fee is based on a fixed element of hire and also an element related to the price of Brent crude oil where we receive incremental tolling fees when the price rises above $60 per barrel. In 2020, we signed an amendment to the LTA that the Customer will compensate Hilli Corp annually for overproduction of annual base liquefaction tonnage. In 2021, we signed amendments to the LTA to extend the original term of the LTA until July 2026, increase the utilization in 2022 by 0.2 million tons of TTF linked LNG production and granted the Customer a one-time option exercisable by July 2022 to increase capacity utilization of Hilli by up to 0.4 million tons of TTF linked LNG production per year from January 2023 through the end of the current contract term in July 2026.
As of December 31, 2021, the LC provided by a financial institution to the Customer had been reduced to $100 million, following the achievement of 3.6 million tonnes of LNG being produced, and we have cash collateral of $60.7 million to support the Hilli performance guarantee, in the event of termination by the Customer due to underperformance or non-performance.
As of April 14, 2022, the Hilli had offloaded a total of 72 LNG cargoes, produced around 5 million tonnes of LNG, and maintained 100% commercial uptime since the start of her operations in May 2018.
(3)The Gandria is currently in lay-up and earmarked for conversion into a FLNG vessel. The conversion agreement is subject to certain payments and lodging of a full Notice to Proceed.

Competition
We operate in competitive markets that are based primarily on supply and demand.

The FLNG industry is in an early stage of development, and we do not currently face significant competition from other providers of FLNG services. There are currently only six FLNGs on the water and one further FLNG currently under construction. We anticipate that other companies, including marine transportation companies with strong reputations and extensive resources and experience, will enter the FLNG industry at some point in the future, resulting in greater competition.

Competition for carrier and FSRU charters is based primarily on price, operational track record, LNG storage capacity, efficiency of the regasification process, vessel availability, size, age and condition and relationships with customers.

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Seasonality

Historically, LNG trade, and therefore charter rates, increased in the winter months and eased in the summer months as demand for LNG for heating in the Northern Hemisphere increased in colder weather and declined in warmer weather. In general, the LNG vessel industry, has become less dependent on the seasonal transport of LNG than it was 15 years ago. The advent of FSRUs has opened new markets and uses for LNG and has helped reduce the impact of seasonality. There is a higher seasonal demand during the summer months due to energy requirements for air conditioning in some markets or reduced availability of hydro power in others and a pronounced higher seasonal demand during the winter months for heating in other markets. There is however a tendency for a weaker vessel market in the periods between winter and summer.

Vessel Maintenance

Safety is our top priority. Our vessels are operated in a manner intended to protect the safety and health of our employees, the general public and the environment. We actively manage the risks inherent in our business and are committed to eliminating incidents that threaten safety, such as groundings, fires, spills and collisions. We are also committed to reducing emissions and waste generation. We have established key performance indicators to facilitate regular monitoring of our operational performance. As part of our ESG reporting we set targets to drive continuous improvement, and we review performance indicators frequently to determine if remedial action is necessary to reach our targets. 

Under our charters, we are responsible for the technical management of the vessels which our subsidiaries and affiliates assist us by managing our vessel operations, maintaining a technical department to monitor and audit our vessel manager operations and providing expertise in various functions critical to our operations. This affords an efficient and cost effective operation and, pursuant to ship management and administrative services agreements with certain of our subsidiaries, access to human resources, financial and other administrative functions.

These functions are supported by on board and onshore systems for maintenance, inventory, purchasing and budget management. In addition, our day-to-day focus on cost control will be applied to our operations. To some extent, the uniform design of some of our vessels and the adoption of common equipment standards should also result in operational efficiencies, including with respect to crew training and vessel management, equipment operation and repairs, and spare parts requisition.

Risk of Loss, Insurance and Risk Management

The operation of any vessel, including LNG carriers, FSRUs and FLNGs has inherent risks. These risks include mechanical failure, personal injury, collision, property loss, vessel or cargo loss or damage and business interruption due to political circumstances in foreign countries and/or war risk situations or hostilities or pandemics. In addition, there is always an inherent possibility of marine disaster, including explosion, spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. We believe that our present insurance coverage is adequate to protect us against the accident related risks involved in the conduct of our business and that we maintain appropriate levels of environmental damage and pollution insurance coverage consistent with standard industry practice. However, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.

The Gimi, is currently undergoing conversion from a LNG carrier to a FLNG and is insured under a building risks policy arranged by the shipyard.

We have obtained hull and machinery insurance on all our vessels against marine and war risks, which include the risks of damage to our vessels, salvage or towing costs, and also insure against actual or constructive total loss of any of our vessels. However, our insurance policies contain deductible amounts for which we will be responsible. We have also arranged additional total loss coverage for each vessel. This coverage, which is called hull interest and freight interest coverage, provides us additional coverage in the event of the total loss of a vessel.

We have also obtained loss of hire insurance to protect us against loss of income in the event one of our vessels cannot be employed due to damage that is covered under the terms of our hull and machinery insurance. Under our loss of hire policies, our insurer will pay us the daily rate agreed in respect of each vessel for each day, in excess of a certain number of deductible days, for the time that the vessel is out of service as a result of damage. The maximum coverage varies from 120 days to 360 days, depending on the vessel. The number of deductible days varies from 30 days to 60 days, depending on the vessel and type of damage; (e.g. whether the claim arises from either machinery or hull damage).

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Protection and indemnity insurance, which covers our third-party legal liabilities in connection with our shipping activities, is provided by mutual protection and indemnity associations (“P&I clubs”). This includes third-party liability and other expenses related to the injury or death of crew members, passengers and other third-party persons, loss or damage to cargo, claims arising from collisions with other vessels or from contact with jetties or wharves and other damage to other third-party property, including pollution arising from oil or other substances, and other related costs, including wreck removal. Subject to the capping discussed below, our coverage, except for pollution, is unlimited.

The current protection and indemnity insurance coverage for pollution is $250 million per incident for the Hilli and $1 billion per vessel per incident for all other vessels. The thirteen P&I clubs that comprise the International Group of Protection and Indemnity Clubs insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. Each P&I club has capped its exposure in this pooling agreement so that the maximum claim covered by the pool and its reinsurance would be approximately $8.2 billion per accident or occurrence. We are a member of Gard and Skuld P&I clubs. As a member of these P&I clubs, we are subject to a call for additional premiums based on the clubs' claims record, as well as the claims record of all other members of the P&I clubs comprising the International Group. However, our P&I clubs have reinsured the risk of additional premium calls to limit our additional exposure. This reinsurance is subject to a cap, and there is the risk that the full amount of the additional call would not be covered by this reinsurance.

The insurers providing the hull and machinery, hull and cargo interests, protection and indemnity and loss of hire insurances have confirmed that they will consider a FSRU as a vessel for the purpose of providing insurance. For the FSRU we have also arranged an additional comprehensive general liability insurance. This type of insurance is common for offshore operations and is additional to the P&I insurance.

Our operations utilize a thorough risk management program that includes, among other things, computer-aided risk analysis tools, maintenance and assessment programs, a seafarers' competence training program, seafarers' workshops and membership in emergency response organizations. We expect to benefit from our commitment to safety and environmental protection as certain of our subsidiaries, affiliates and service providers assists us in managing our vessel operations. Cool Company Management AS (formerly known as Golar Management Norway (“CCMN”), our former subsidiary and currently our service provider, received its ISO 9001 certification for a quality management system in April 2011, and is certified in accordance with the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention (the “ISM”), on a fully integrated basis.

Classification, Inspection and Maintenance
 
Every large, commercial seagoing vessel must be classed by a classification society. A classification society certifies that a vessel is in class, signifying that the vessel has been built and maintained in accordance with the rules of the vessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
 
For maintenance of the class certificate, regular and extraordinary surveys of hull, machinery, including the electrical plant and any special equipment classed, are required to be performed by the classification society, to ensure continuing compliance.  Most vessels are drydocked at least once during a five-year class cycle for inspection of the underwater parts and for repairs related to inspections. If any defects are found, the classification surveyor will issue a recommendation which must be rectified by the shipowner within prescribed time limits. The classification society also undertakes on request of the flag state other surveys and checks that are required by the regulations and requirements of that flag state. These surveys are subject to agreements made in each individual case and/or to the regulations of the country concerned.

All insurance underwriters make it a condition for insurance coverage that a vessel be certified as “in class” by a classification society, which is a member of the International Association of Classification Societies. Golar Arctic is certified by the American Bureau of Shipping. All of our other vessels are certified by Det Norske Veritas GL. Both societies are members of the International Association of Classification Societies. All of our vessels have been awarded ISM certification and are currently “in class” other than two vessels, the Gimi and the Gandria, with the Gimi in Keppel's shipyard in Singapore for her conversion into a FLNG, and the Gandria currently in lay up.
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We carry out inspections of the vessels on a regular basis; both at sea or while the vessels are in port or following COVID-19 restrictions, on a remote basis where applicable. The results of these inspections, which are conducted both in port and while underway, result in a report containing recommendations for improvements to the overall condition of the vessel, maintenance, safety and crew welfare. Based in part on these evaluations, we create and implement a program of continual maintenance and improvement for our vessels and their systems.

Environmental and Other Regulations

General
 
Our business and the operation of our vessels are subject to various international treaties and conventions and to the applicable local national and subnational laws and regulations of the countries in which our vessels operate or are registered. Such laws and regulations cover a variety of topics, including but not limited to air pollution, water pollution, waste management, protection of natural resources, and protection of worker health and safety, and might require us to obtain governmental permits and authorizations before we may conduct certain activities. Failure to comply with these laws or to obtain the necessary business and technical licenses could result in sanctions including suspension and/or freezing of the business and responsibility for all damages arising from any violation.

Governments may also periodically revise their environmental laws and regulations or adopt new ones, and the effects of new or revised laws and regulations on our operations cannot be predicted. Although we believe that we are substantially in compliance with applicable environmental laws and regulations and have all permits, licenses and certificates required for our vessels, future non-compliance or failure to maintain necessary permits or approvals could require us to incur substantial costs or temporarily suspend the operation of one or more of our vessels. There can be no assurance that additional significant costs and liabilities will not be incurred to comply with such current and future laws and regulations, or that such laws and regulations will not have a material effect on our operations. Similar or more stringent laws may also apply to our customers, including oil & gas exploration and production companies, which may impact demand for our services.

International environmental treaties and conventions as well as U.S. environmental laws and regulations that apply to the operation of our vessels are described below. Other countries, including member countries of the European Union, in which we operate or in which our vessels are registered have or may in the future have laws and regulations that are similar, or more stringent, in nature to the U.S. laws referenced below. CCMN provides technical management services for our vessels, is certified in accordance with the IMO standard for ISM and operates in compliance with the International Standards Organization (the “ISO”) Environmental Management Standard for the management of significant environmental aspects associated with the ownership and operation of our fleet.

International Maritime Regulations of LNG Vessels
 
The IMO provides international regulations governing shipping and international maritime trade. Among other requirements, the International Safety Management Code for the Safe Operation of Ships and for Pollution Prevention (“the ISM Code”) requires the party with operational control of a vessel to develop an extensive safety management system and the adoption of a policy for safety and environmental protection setting forth instructions and procedures for operating its vessels safely and also describing procedures for responding to emergencies. Our ship manager holds a document of compliance under the ISM Code for operation of Gas Carriers.

Vessels that transport gas, including LNG carriers and FSRUs, are also subject to regulation under the International Code for the Construction and Equipment of Ships Carrying Liquefied Gases in Bulk (the “IGC Code”), published by the IMO. The IGC Code provides a standard for the safe carriage of LNG and certain other liquid gases by prescribing the design and construction standards of vessels involved in such carriage. The completely revised and updated IGC Code entered into force in 2016, and the amendments were developed following a comprehensive five-year review and are intended to take into account the latest advances in science and technology. Compliance with the IGC Code must be evidenced by a Certificate of Fitness for the Carriage of Liquefied Gases in Bulk. Each of our vessels is in compliance with the IGC Code and each of our new buildings/conversion contracts requires that the vessel receive certification that it is in compliance with applicable regulations before it is delivered.

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The IMO also promulgates ongoing amendments to the International Convention for the Safety of Life at Sea (“SOLAS”), which provides rules for the construction of and equipment required for commercial vessels and includes regulations for safe operation and addresses maritime security. SOLAS requires, among other things, the provision and maintenance of lifeboats and other life-saving appliances, requires the use of the Global Maritime Distress and Safety System (an international radio equipment and watch keeping standard), afloat and at shore stations, and relates to the International Convention on the Standards of Training and Certification of Watchkeeping Officers (“STCW”) also promulgated by the IMO. The STCW establishes minimum training, certification, and watchkeeping standards for seafarers. The SOLAS and other IMO regulations concerning safety, including those relating to treaties on training of shipboard personnel, lifesaving appliances, radio equipment and the global maritime distress and safety system, are applicable to our operations. Flag states that have ratified the SOLAS and STCW generally employ the classification societies, which have incorporated the SOLAS and STCW requirements into their class rules, to undertake surveys to confirm compliance.

In the wake of increased worldwide security concerns, the IMO amended SOLAS and added the International Ship and Port Facility Security Code (“ISPS Code”), which came into effect on July 1, 2004, to detect security threats and take preventive measures against security incidents affecting vessels or port facilities. CCMN has developed security plans and appointed and trained ship and office security officers. In addition, all of our vessels have been certified to meet the ISPS Code and the security requirements of the SOLAS and the Maritime Transportation Security Act (“MTSA”).

The IMO continues to review and introduce new regulations. It is impossible to predict what additional regulations, if any, may be passed by the IMO and what effect, if any, such regulation may have on our operations. Non-compliance with the IGC Code or other applicable IMO regulations may subject a shipowner or a bareboat charterer to increased liability or penalties, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports.

Air Emissions
 
The IMO adopted MARPOL, which imposes environmental standards on the shipping industry relating to marine pollution, including oil spills, management of garbage, the handling and disposal of noxious liquids, sewage and air emissions. MARPOL is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling and applies to various vessels delivered on or after August 1, 2010. It includes requirements for the protected location of the fuel tanks, performance standards for accidental oil fuel outflow, a tank capacity limit and certain other maintenance, inspection and engineering standards. IMO regulations also require owners and operators of vessels to adopt Shipboard Oil Pollution Emergency Plans. Periodic training and drills for response personnel and for vessels and their crews are required. Annexes II and III relate to harmful substances carried in bulk, in liquid or in packaged form, respectively, and Annexes IV and V relate to sewage and garbage management, respectively.

MARPOL 73/78 Annex VI regulations for the “Prevention of Air Pollution from Ships” apply to all vessels, fixed and floating drilling rigs and other floating platforms. Annex VI sets limits on sulfur oxide and nitrogen oxide emissions from vessel exhausts, emissions of volatile compounds from cargo tanks, incineration of specific substances, and prohibits deliberate emissions of ozone depleting substances. Annex VI also includes a global cap on sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulfur emissions. The certification requirements for Annex VI depend on size of the vessel and time of the periodic classification survey. Ships weighing more than 400 gross tons and engaged in international voyages involving countries that have ratified the conventions, or vessels flying the flag of those countries, are required to have an International Air Pollution Certificate (“IAPP Certificate”). Annex VI came into force in the United States on January 8, 2009. All our vessels delivered or drydocked since May 19, 2005 have been issued IAPP Certificates.

Amendments to Annex VI to the MARPOL Convention that took effect in 2010 imposed progressively stricter limitations on sulfur emissions from vessels. As of January 1, 2020, the ultimate limit of 0.5% allowable sulfur content for fuel used to power vessels operating in areas outside of designated emission control areas (“ECAs”) took effect. This represents a substantial reduction from the previous 3.5% sulfur cap. The 0.5% sulfur cap is generally referred to as IMO 2020 and applies absent the installation of expensive sulfur scrubbers to meet reduced emission requirements for sulfur. Our vessels have achieved compliance with sulfur emission standards, where necessary, by being modified to burn gas only in their boilers when alongside a berth. The amendments to Annex VI also established new tiers of stringent nitrogen oxide emissions standards for new diesel engines, depending on their date of installation. The European directive 2005/33/EC bans the use of fuel oils containing more than 0.10% sulfur by mass by any merchant vessel while at berth in any EU country.

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Even more stringent sulfur emission standards apply in coastal areas designated as ECAs, such as the United States and Canadian coastal areas designated by the IMO's Marine Environment Protection Committee (“MEPC”), as discussed in the “U.S. Clean Air Act” below. These areas include certain coastal areas of North America and the United States Caribbean Sea. Annex VI Regulation 14, which came into effect on January 1, 2015, set a 0.10% sulfur limit in areas of the Baltic Sea, North Sea, North America, and United States Caribbean Sea ECAs.

U.S. air emissions standards are now equivalent to these amended Annex VI requirements. Additional or new conventions, laws and regulations may be adopted that could require the installation of expensive emission control systems. Because our vessels are largely powered by means other than fuel oil we do not anticipate that any emission limits that may be promulgated will require us to incur any material costs for the operation of our vessels, but that possibility cannot be eliminated.

Clean Air Act

The U.S. Clean Air Act of 1970 (including its amendments of 1977 and 1990) (“CAA”) requires the Environmental Protection Agency (the “EPA”) to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargos when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas and emission standards for so-called “Category 3” marine diesel engines operating in U.S. waters. The marine diesel engine emission standards are currently limited to new engines beginning with the 2004 model year. On April 30, 2010, the EPA promulgated final emission standards for Category 3 marine diesel engines equivalent to those adopted in the amendments to Annex VI to MARPOL. The emission standards apply in two stages: near-term standards for newly-built engines apply from 2011, and long-term standards requiring an 80% reduction in nitrogen dioxides, or NOx, apply from 2016. A further stage of reductions, known as “Tier 4” standards, has also been developed and implemented. However, in October 2020, EPA published a final rule to provide additional lead time for implementation for certain high-speed vessels. Pursuant to the final rule, the Tier 4 standards apply from model year 2022 for engines installed in a wide range of high-speed vessels, and from model year 2024 for engines installed in certain other such vessels, subject to certain limitations. Separately, in December 2019, the EPA published a final rule concerning national diesel fuel regulations that will allow fuel suppliers to distribute distillate diesel fuel that complies with the 0.5% international sulfur cap instead of fuel standards that otherwise apply to distillate diesel fuel in the United States. Fuel that does not meet the 0.5% sulfur cap cannot be used in ECA boundaries. Compliance with these standards may cause us to incur costs to install control equipment on our vessels in the future.

Anti-Fouling Requirements
Anti-fouling systems, such as paint or surface treatment, are used to coat the bottom of vessels to prevent the attachment of mollusks and other sea life to the hulls of vessels. Our vessels are subject to the IMO’s International Convention on the Control of Harmful Anti-fouling Systems on Ships, or the “Anti-fouling Convention”, which prohibits the use of organotin compound coatings in anti-fouling systems. Vessels of over 400 gross tons engaged in international voyages must obtain an International Anti-fouling System Certificate and undergo an initial survey before the vessel is put into service or when the anti-fouling systems are altered or replaced. In November 2020, MEPC 75 approved draft amendments to the Anti-fouling Convention to prohibit anti-fouling systems containing cybutryne, which would apply to ships from January 1, 2023, or, for ships already bearing such an anti-fouling system, at the next scheduled renewal of the system after that date, but no later than 60 months following the last application to the ship of such a system. These amendments were formally adopted at MEPC 76 in June 2021. We have obtained Anti-fouling System Certificates for all of our vessels, and we do not believe that maintaining such certificates will have an adverse financial impact on the operation of our vessels.

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Oil Pollution Act and The Comprehensive Environmental Response Compensation and Liability Act
 
The U.S. Oil Pollution Act of 1990 (“OPA”) established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all owners and operators whose vessels trade or operate within the U.S., its territories and possessions, or whose vessels operate in the waters of the U.S., which includes the U.S. territorial seas and its 200 nautical mile exclusive economic zone. The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), which applies to the discharge of hazardous substances whether on land or at sea. While OPA and CERCLA would not apply to the discharge of LNG, these laws may affect us because we carry oil as fuel and lubricants for our engines, and the discharge of these could cause an environmental hazard. Under OPA, vessel owners and operators, are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels, including bunkers (fuel). OPA defines these damages broadly to include:
 
injury to, destruction or loss of, or loss of use of, natural resources and related assessment costs;
injury to, or economic losses resulting from, the destruction of real and personal property;
net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
loss of subsistence use of natural resources that are injured, destroyed or lost;
lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards.

The limits of OPA liability are the greater of $2,300 per gross ton or $19,943,400 for any tanker other than single-hull tank vessels, over 3,000 gross tons (subject to possible adjustment for inflation). These limits of liability do not apply, however, where the incident is caused by violation of applicable U.S. federal safety, construction or operating regulations, or by the responsible party's gross negligence or willful misconduct. These limits likewise do not apply if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the substance removal activities. OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states have enacted legislation providing for unlimited liability for discharge of pollutants within their waters. In some cases, states, which have enacted their own legislation, have not yet issued implementing regulations defining ship owners’ responsibilities under these laws.

CERCLA, which also applies to owners and operators of vessels, contains a similar liability regime and provides for recovery of clean up and removal costs and the imposition of natural resource damages for releases of “hazardous substances,” which as defined in CERCLA does not include oil. Liability under CERCLA is limited to the greater of $300 per gross ton or $0.5 million for each release from vessels not carrying hazardous substances as cargo or residue, and the greater of $300 per gross ton or $5 million for each release from vessels carrying hazardous substances as cargo or residue. As with OPA, these limits of liability do not apply where the incident is caused by violation of applicable U.S. federal safety, construction or operating regulations, or by the responsible party's gross negligence or willful misconduct or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with the substance removal activities. OPA and CERCLA each preserve the right to recover damages under existing law, including maritime tort law. We believe that we are in substantial compliance with OPA, CERCLA and all applicable state regulations in the ports where our vessels call.

OPA and CERCLA both require owners and operators of vessels to establish and maintain with the USCG evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guaranty. Under OPA regulations, an owner or operator of more than one vessel is required to demonstrate evidence of financial responsibility for the entire fleet in an amount equal only to the financial responsibility requirement of the vessel having the greatest maximum liability under OPA/CERCLA. Each of our ship owning subsidiaries and affiliates that has vessels trading in U.S. waters has applied for and obtained from the U.S. Coast Guard National Pollution Funds Center three-year certificates of financial responsibility, or COFRs, supported by guarantees purchased from an insurance based provider. We believe that we will be able to continue to obtain the requisite guarantees and that we will continue to be granted COFRs from the U.S. Coast Guard for each of our vessels that is required to have one.

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Compliance with any new requirements of OPA and future legislation or regulations applicable to the operation of our vessels could impact the cost of our operations and adversely affect our business and ability to make distributions to our shareholders. We currently maintain pollution liability coverage insurance in the amount of $1 billion per incident for each of our vessels. If the damages from a catastrophic spill were to exceed our insurance coverage it could have an adverse effect on our business and results of operation.

 Bunker Convention/CLC State Certificate

The International Convention on Civil Liability for Bunker Oil Pollution 2001, (“the Bunker Convention”), entered into force on November 21, 2008. The Bunker Convention provides a liability, compensation and compulsory insurance system for the victims of oil pollution damage caused by spills of bunker oil. The Bunker Convention imposes strict liability on ship owners (including the registered owner, bareboat charterer, manager or operator) for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. Registered owners of any sea going vessel and seaborne craft over 1,000 gross tonnage, of any type whatsoever, and registered in a State Party, or entering or leaving a port in the territory of a State Party, will be required to maintain insurance which meets the requirements of the Bunker Convention and to obtain a certificate issued by a State Party attesting that such insurance is in force. The State Party issued certificate must be carried on board at all times. P&I Clubs in the International Group issue the required Bunker Convention “Blue Cards” provide evidence that there is insurance in place that meets the Bunker Convention requirements and thereby enable signatory states to issue certificates. All of our vessels have received “Blue Cards” from their P&I Club and are in possession of a Civil Liability Convention (CLC) State-issued certificate attesting that the required insurance cover is in force.

Ballast Water Management Convention, Clean Water Act and National Invasive Species Act
 
The IMO has negotiated international conventions that impose liability for pollution in international waters and the territorial waters of the signatories to such conventions. The EPA and USCG, have also enacted rules relating to ballast water discharge for all vessels entering or operating in United States waters. Compliance requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict our vessels from entering United States waters.

a. Ballast Water Management Convention

In February 2004, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments (the “BWM Convention”). The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements to be replaced in time with mandatory concentration limits. As of December 31, 2021, all our operational LNG carriers and FSRU had installed ballast water treatment systems.

b. Clean Water Act

The U.S. Clean Water Act (the “CWA”) prohibits the discharge of oil, hazardous substances and ballast water in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In addition, many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law.

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The EPA regulates the discharge of ballast and bilge water and other substances in United States waters under the CWA. The EPA regulations historically have required vessels 79 feet in length or longer (other than commercial fishing vessels and recreational vessels) to obtain and comply with a permit that regulates ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters. In March 2013, the EPA issued the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels, (“VGP”). The 2013 VGP focuses on authorizing discharges incidental to operations of commercial vessels and contains ballast water discharge limits for most vessels to reduce the risk of invasive species in US waters, more stringent requirements for exhaust gas scrubbers and the use of environmentally acceptable lubricants. In December 2018, the Vessel Incidental Discharge Act (“VIDA”) was signed into law and restructured the EPA and the USCG programs for regulating incidental discharges from vessels. Rather than requiring CWA permits, the discharges will be regulated under a new CWA Section 312(p) establishing Uniform National Standards for Discharges Incidental to Normal Operation of Vessels. Under VIDA, VGP provisions and existing USCG regulations will be phased out over a period of approximately four years and replaced with National Standards of Performance (“NSPs”) to be developed by EPA and implemented and enforced by the USCG. Under VIDA, the EPA was directed to develop the NSPs by December 2020 and the USCG is directed to develop its corresponding regulations two years after EPA develops the NSPs. On October 26, 2020, EPA issued proposed regulations to establish NSPs, including general discharge standards of performance, covering general operation and maintenance, biofouling management, and oil management, and specific discharge standards applicable to specified pieces of equipment and systems. The 2013 VGP was scheduled to expire in December 2018, however, under VIDA the provisions of the 2013 VGP will remain in place until the new EPA and USCG regulations are in place, which remain outstanding. Pursuant to the requirements in the VGP, vessel owners and operators must meet twenty-five sets of state-specific requirements as the CWA’s 401 certification process allows tribes and states to impose their own requirements for vessels operating within their waters. Vessels operating in multiple jurisdictions could face potentially conflicting conditions specific to each jurisdiction that they travel through.

c. National Invasive Species Act

The USCG regulations adopted under the U.S. National Invasive Species Act (“NISA”) require the USCG's approval of any technology before it is placed on a vessel. As a result, the USCG has provided waivers to vessels which could not install the then as-yet unapproved technology. In May 2016, the USCG published a review of the practicability of implementing a more stringent ballast water discharge standard. The results concluded that technology to achieve a significant improvement in ballast water treatment efficacy cannot be practically implemented. In February 2016, the USCG issued a new rule amending the Coast Guard’s ballast water management record-keeping requirements. Effective February 22, 2016, vessels with ballast tanks operating exclusively on voyages between ports or places within a single Captain of the Port zone were required to submit an annual report of their ballast water management practices. Further, under the amended requirements, vessels may submit their reports after arrival at the port of destination instead of prior to arrival. As discussed above, under VIDA, existing USCG ballast water management regulations will be phased out over a period of approximately four years and replaced with NSPs to be developed by EPA and implemented and enforced by the USCG.

European Union Regulations

In October 2009, the European Union amended a directive to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water. Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties. The directive applies to all types of vessels, irrespective of their flag, but certain exceptions apply to warships or where human safety or that of the ship is in danger. Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims. Regulation (EU) 2015/757 of the European Parliament and of the Council of 29 April 2015 (amending EU Directive 2009/16/EC) governs the monitoring, reporting and verification of carbon dioxide emissions from maritime transport, and, subject to some exclusions, requires companies with ships over 5,000 gross tonnage to monitor and report carbon dioxide emissions annually, which may cause us to incur additional expenses.

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The European Union has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age and flag as well as the number of times the ship has been detained. The European Union also adopted and extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses. The regulation also provided the European Union with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply. Furthermore, the EU has implemented regulations requiring vessels to use reduced sulfur content fuel for their main and auxiliary engines. The EU Directive 2005/33/EC (amending Directive 1999/32/EC) introduced requirements parallel to those in Annex VI relating to the sulfur content of marine fuels. In addition, the EU imposed a 0.1% maximum sulfur requirement for fuel used by ships at berth in the Baltic, the North Sea and the English Channel (the so called “SOx-Emission Control Area”). As of January 2020, EU member states must also ensure that ships in all EU waters, except the SOx-Emission Control Area, use fuels with a 0.5% maximum sulfur content.

International Labour Organization

The International Labour Organization (the “ILO”) is a specialized agency of the UN that has adopted the Maritime Labor Convention 2006 (“MLC 2006”). A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance is required to ensure compliance with the MLC 2006 for all ships that are 500 gross tonnage or over and are either engaged in international voyages or flying the flag of a Member and operating from a port, or between ports, in another country. We believe that all our vessels are in substantial compliance with and are certified to meet MLC 2006.

Greenhouse Gas (“GHG”) Regulation
 
The issue of climate change and the effect of GHG emissions, in particular emissions from fossil fuels, has and continues to attract attention from a wide range of groups, including politicians, regulators, financial institutions, and the general public.

Currently, emissions of GHGs from international shipping are not subject to the international protocols and agreements addressing climate change, such as the 2005 Kyoto Protocol and the 2015 Paris Agreement. However, absent a global approach to address GHG emissions from international transport, the European Union has initiated action and is pursuing a strategy to integrate maritime emissions into the overall European Union strategy to reduce GHG emissions. In 2013, the European Commission initiated a three-step strategy aimed at this reduction consisting of (i) monitoring, reporting and verification of carbon dioxide emissions from large vessels using European Union ports, (ii) establishment of GHG reduction targets for sector; and (iii) implementation of further measures, including market-based measures such an emissions trading, in the medium to long term. EU Directive 2018/410, which amended the EU Emissions Trading System Directive, emphasized the need to act on GHG emissions from shipping and other sectors and called for action by either IMO or the European Union to address emissions from the international transport sector from 2023. The first step of the three-step strategy initiated in 2013 was addressed with a European Union regulation that took effect in January 2018 that requires large vessels (over 5,000 gross tons) calling at European ports to collect and publish data on carbon dioxide emissions and other information. On September 15, 2020, the European Parliament approved draft legislation, which has not yet been finalized, that would include GHG emissions from large vessels in the EU emissions trading system as of January 1, 2022 and include methane emissions in monitoring, reporting and verification requirements applicable to vessels. The European Parliament has also called for binding carbon dioxide reduction targets for shipping companies, which would require reduction of annual average carbon dioxide emissions of all ships during operation by at least 40% relative to 2008 levels, by 2030, and apply even deeper cuts by 2050.

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In addition, the IMO has taken some action, including mandatory measures to reduce emissions of GHGs from all vessels that took effect in January 2013. These measures included amendments to MARPOL Annex VI Regulations requiring the Energy Efficiency Design Index (“EEDI”) for new vessels, and the Ship Energy Efficiency Management Plan (“SEEMP”) for all vessels. The regulations apply to all vessels of 400 gross tonnage and above. The IMO also adopted a mandatory requirement in October 2016, which entered into force in March 2018, that ships of 5,000 gross tonnage and above record and report their fuel oil consumption, with the first year of data collection having commenced on January 1, 2019. These measures affect the operations of vessels that are registered in countries that are signatories to MARPOL Annex VI or vessels that call upon ports located within such countries. MEPC subsequently adopted further amendments to MARPOL Annex VI intended to significantly strengthen the EEDI “phase 3” requirements. These amendments accelerate the entry into effect date of phase 3 from 2025 to 2022 for several ship types, including gas carriers, general cargo ships and LNG carriers and require new ships built from that date to be significantly more energy efficient. The MEPC also is looking into the possible introduction of a phase 4 of EEDI requirements. The implementation of the EEDI and SEEMP standards could cause us to incur additional compliance costs. The IMO is also considering the implementation of a market-based mechanism for greenhouse gas emissions from vessels. The IMO adopted its initial GHG reduction strategy in 2018 and established a program of follow-up actions up to 2023 as a planning tool. (“IMO GHG Strategy”). The IMO GHG Strategy has established a goal of a reduction in carbon intensity of international shipping by at least 40% by 2030 compared to 2008, and by at least 50% by 2050 compared to 2008.

In November 2020, the MEPC agreed to draft amendments to MARPOL Annex VI establishing an enforceable regulatory framework to reduce GHG emissions from international shipping, consisting of technical and operational carbon reduction measures. These measures include use of an Energy Efficiency Existing Ship Index (“EEXI”), an operational Carbon Intensity Indicator (“CII”) and an enhanced SEEMP to drive carbon intensity reductions. A vessel’s attained EEXI would be calculated in accordance with values established based on type and size category, which compares the vessels’ energy efficiency to a baseline. A vessel would then be required to meet a specific EEXI based on a required reduction factor expressed as a percentage relative to the EEDI baseline. Under the draft MARPOL VI amendments, vessels with a gross tonnage of 5,000 or greater must determine their required annual operational CII and their annual carbon intensity reduction factor needed to ensure continuous improvement of the vessel’s CII. On an annual basis, the actual annual operational CII achieved would be documented and verified against the vessel’s required annual operational CII to determine the vessel’s operational carbon intensity rating on a performance level scale of A (major superior) to E (inferior). The performance level would be required to be recorded in the vessel’s SEEMP. A vessel with an E rating, or three consecutive years of a D (minor inferior) rating, would be required to submit a corrective action plan showing how the vessel would achieve a C (moderate) or above rating. This regulatory approach is expected to be consistent with the IMO GHG Strategy target of a 40% carbon intensity reduction for international shipping by 2030, as compared to 2008. MEPC adopted these amendments to MARPOL Annex VI in June 2021 and are expected to enter into force by November 2022, with the requirements for EEXI and CII certification coming into effect January 2023. At the same meeting, MEPC announced plans to revise the IMO GHG Strategy to establish stronger targets, with an aim to adoption of a revised strategy at the MEPC meeting in Spring 2023.

An increasing number of financial institutions have also established policies or commitments to reduce emissions associated with their portfolios. In 2019, a consortium of shipping financiers launched the Poseidon Principles, a framework to assess and disclose the alignment of ship finance portfolios with the climate-related goals of the IMO. While voluntary, signatories commit to implementing the Poseidon Principles in their internal policies. Similarly, at the 26th Conference to the Parties of the United Nations Framework Convention on Climate Change (“COP 26”), the Glasgow Financial Alliance for Net Zero (“GFANZ”) announced that commitments from over 450 firms across 45 countries had resulted in over $130 trillion in capital committed to net zero goals. The various sub-alliances of GFANZ generally require participants to set short-term, sector-specific targets to transition their financing, investing, and/or underwriting activities to net zero emissions by 2050. There is also a risk that financial institutions will be required to adopt policies that have the effect of reducing the funding provided to the fossil fuel sector. In late 2020, the Federal Reserve announced that it had joined the Network for Greening the Financial System, a consortium of financial regulators focused on addressing climate-related risks in the financial sector. Subsequently, the Federal Reserve has issued a statement in support of the efforts of the NGFS to identify key issues and potential solutions for the climate-related challenges most relevant to central banks and supervisory authorities. Limitation of investments in and financings for fossil fuel energy companies could result in the restriction, delay or cancellation of drilling programs or development, production, liquefaction, or related activities, which may ultimately reduce demand for our services. Additionally, the Securities and Exchange Commission announced its intention to promulgate rules requiring climate disclosures. Although the form and substance of these requirements is not yet known, this may result in additional costs to comply with any such disclosure requirements.

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In the U.S., the EPA issued a finding that GHGs endanger public health and safety and has adopted regulations that regulate the emission of GHGs from certain sources. For example, fossil fuel companies to whom we provide services are subject to regulations by various government agencies, which may include the EPA and bodies within the Department of the Interior (“DOI”). These regulations may include restrictions on certain oil & gas production or stimulation techniques, requirements for the installation and use of certain emissions control technologies, and other regulations that may adversely impact the operations of our customers, which may ultimately reduce demand for our services. Regarding our own operations, the EPA enforces both the CAA and the international standards found in Annex VI of MARPOL concerning marine diesel emissions, and the sulfur content found in marine fuel. Other federal and state regulations relating to the control of greenhouse gas emissions may follow, including climate change initiatives that have been considered in the U.S. Congress. Notably, the U.S. rejoined the Paris Agreement in February 2021, and, in April 2021, announced a new, more rigorous nationally determined emissions reduction level of 50-52% reduction from 2005 levels in economy-wide net GHG emissions by 2030. At the international level, at COP 26, the U.S. and European Union jointly announced the launch of the Global Methane Pledge, an initiative committing to a collective goal of reducing global methane emissions by at least 30% from 2020 levels by 2030, including “all feasible reductions” in the energy sector.

Any passage of climate control legislation or other regulatory or policy initiatives by the IMO, the European Union, the United States, or other countries where we operate, or any treaty adopted at the international level that restricts emissions of GHGs from vessels, could require us to make significant financial expenditures that we cannot predict with certainty at this time. In addition, even without such regulation, our business may be indirectly affected to the extent that climate change results in sea level changes or more intense weather events.

Other Regulations

Our LNG vessels may also become subject to the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, or HNS, adopted in 1996, the HNS Convention, and subsequently amended by the April 2010 Protocol. The HNS Convention creates a regime of liability and compensation for damage from hazardous and noxious substances, including liquefied gases. The HNS Convention introduces strict liability for the ship owner and covers pollution damage as well as the risks of fire and explosion, including loss of life or personal injury and damage to property. At least 12 states must ratify or accede to the 2010 Protocol for it to enter into effect. In July 2019, South Africa became the 5th state to ratify the protocol. At least 7 more states must ratify or accede to the treaty for it to enter into effect.

    The April 2010 Protocol sets up a two-tier system of compensation composed of compulsory insurance taken out by ship owners and an HNS fund that comes into play when the insurance is insufficient to satisfy a claim or does not cover the incident. Under the 2010 Protocol, if damage is caused by bulk HNS, claims for compensation will first be sought from the ship owner up to a maximum of 100 million Special Drawing Rights, or SDR. SDR is a potential claim on the freely usable currencies of the IMF members. If the damage is caused by packaged HNS or by both bulk and packaged HNS, the maximum liability is 115 million SDR. Once the limit is reached, compensation will be paid from the HNS Fund up to a maximum of 250 million SDR. We cannot estimate the costs that may be needed to comply with any such requirements that may be adopted with any certainty at this time.

C.            Organizational Structure

For a list of our significant subsidiaries, please see Exhibit 8.1 to this annual report and note 4 “Subsidiaries” of our consolidated financial statements included herein. All of our subsidiaries are, directly or indirectly, wholly-owned by us except for Hilli LLC, Hilli Corp and Gimi MS Corporation (“Gimi MS”).

D.            Property, Plant and Equipment

For information on our fleet, please see the section of this item entitled “Vessel Operations”.

We do not own any interest in real estate. As of December 31, 2021, we lease approximately 10,700 square feet of office space in London and approximately 32,000 square feet of office space in Oslo. For our ship management operations, we lease approximately 4,200 square feet of office space in Malaysia, approximately 5,500 square feet of office space in Croatia, approximately 2,500 square feet of office space in Bermuda and approximately 2,100 square feet of office space in Cameroon.

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ITEM 4A.  UNRESOLVED STAFF COMMENTS

None.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations should be read in conjunction with the sections of this Annual Report entitled “Item 4. Information on the Company” and our audited financial statements and notes thereto, included herein. Our financial statements have been prepared in accordance with U.S. GAAP. This discussion includes forward-looking statements based on assumptions about our future business. You should also review the section of this Annual Report entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Item 3. Key Information - D. Risk Factors” for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by certain forward-looking statements.

Significant Developments in Early 2022

Financings

(i) 2017 Convertible bonds

In February 2022, we fully redeemed the outstanding notional value of our 2017 Convertible Bonds, inclusive of interest, amounting to $321.7 million.

(ii) Corporate bilateral facility

In February 2022, Golar LNG executed a $250 million corporate bilateral facility with Sequoia Investment Management secured by our shareholding in FLNG Hilli and Gimi. The corporate bilateral facility has a tenor of 7-years with a bullet payment maturing in February 2029 and bears interest of LIBOR plus a margin range of 4.5% to 5.5%, subject to certain financial ratio thresholds. The corporate bilateral facility remained undrawn as of April 14, 2022 and will remain available for drawdown until 30 June 2022.

(iii) Norwegian Bonds

In October 2021, we placed $300 million in senior unsecured bonds carrying a fixed coupon of 7% in the Nordic bond market (the “Norwegian Bonds”). In March 2022, we subsequently listed the Norwegian bonds on the Oslo Børs.

(iv) Share buyback

In March 2022, we repurchased 368,496 shares in Golar LNG, as part of our share repurchase program, at a total cost of $6.6 million, inclusive of related fees. These shares were subsequently cancelled in March 31, 2022, reducing the balance of issued and outstanding common shares.

(v) Sale of NFE common stock

In April 2022, we sold 6.2 million shares of our NFE common stock raising net proceeds of $253.0 million. We plan to use these proceeds to deploy FLNG growth projects and general corporate purposes. Following the sale of such shares, our remaining holdings in NFE common stock is 12.4 million.

UK tax lease benefits

In April 2022, we settled and paid in full, the UK HMRC, our liability in relation to past tax leases, amounting to $63.5 million, of which $16.0 million was funded from our restricted cash. The first priority security interest on the Gandria and the second priority security interests on the Golar Tundra and Golar Frost were also released.


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Completion of the sale of eight TFDE LNG vessels to Cool Co

On January 26, 2022, we and Cool Co, our wholly owned subsidiary, entered into the Vessel SPA under which Cool Co will acquire eight modern TFDE LNG vessels and the Cool Pool Limited, the fleet's commercial management company, from us. The purchase price for each vessel was agreed at $145.0 million, subject to working capital and debt adjustments. Following completion of the transactions contemplated under the Vessel SPA in April 2022, we now own 31.3% interest in Cool Co. The existing sale and leaseback loans, except for the loans secured over the Golar Ice and Golar Kelvin which will be assumed by Cool Co, were refinanced in connection with the closing of the Vessel SPA and were contemporaneously deconsolidated from our financial statements. Post completion of the transactions contemplated under the Vessel SPA, we will continue to be the guarantor to the Golar Ice and Golar Kelvin sale and leaseback arrangements. Subject to certain adjustments which include but are not limited to net debt and working capital at the date of deconsolidation, the indicative book loss on disposal is estimated at $200 - $250 million.

Factors Affecting Our Future Results of Operations and Financial Condition

Our historical results of operations and cash flows may not be indicative of our future results of operations which may be principally affected for the following reasons:

A decline in NFE's share price may adversely affect our business. On April 15, 2021, upon the closing of the Hygo Merger, we received 18.6 million shares of NFE common stock valued at $44.65 per share and subsequent to our sale of 6.2 million shares of NFE common stock in April 2022, we now hold 12.4 million shares. Our future results of operations are therefore exposed to the volatility of NFE's share price. Subsequent to the Hygo Merger, the price of NFE common shares has fluctuated significantly, reaching a low of $19.17 per share in February 2022 and recovering to $48.29 in April 2022. Should the price of NFE common shares fall materially, our cash flows, financial condition and results of operations could be adversely affected.

Operation and maintenance of external vessels. In December 2020, the LNG Croatia was accepted by LNG Hrvatska, its customer, following her conversion to a FSRU. Under the O&M Agreement, we will operate and maintain the LNG Croatia for a minimum period of 10 years, effective January 1, 2021. Should we be unable to meet our obligations under the O&M agreement, we could be obligated to pay damages to LNG Hrvatska which could have a negative impact on our earnings and cash flow and harm our reputation.

Conversion of the Gimi. FLNG Gimi conversion project is 82% technically complete as of April 14, 2022. The FLNG conversion requires highly specialized contractors and is subject to risk of delay or default by shipyard or other factors outside our or the shipyard's control such as COVID-19. In the event the shipyard does not perform under the terms of the agreement and we are unable to enforce certain refund guarantees with third party banks, we may lose part or all of our investment, breach certain bank covenants which will obligate us to repay the outstanding debt principal and associated interest and penalties and harm our reputation as a FLNG company.
Utilization of the Hilli's full capacity. In July 2021, we signed an agreement with the Customer to increase the utilization of Hilli (“the Hilli Extended Capacity Agreement”). Commencing in January 2022, the capacity utilization of Hilli will increase by 0.2 million tons of LNG, bringing total utilization in 2022 to 1.4 million tons (“2022 Incremental Capacity”). Under the Hilli Extended Capacity Agreement, we also granted the Customer an option to increase the capacity utilization of Hilli by up to 0.4 million tons of LNG per year from January 1, 2023 through to the end of the current contract term in July 2026, which must be declared by the Customer during the third quarter of 2022 (“2023 Incremental Capacity”). Should the option for the 2023 Incremental Capacity not be exercised, this could adversely affect our plans to realize the full potential of this asset and maximize return on our investment.

Our results are dependent on the performance of our equity method investments. Given our substantial investments in Cool Co and Avenir, adverse net results from these investees could affect our earnings which may eventually negatively impact the price of our common shares.

Our results are affected by fluctuations in the fair value of our derivative instruments. The change in fair value of our derivative instruments is included in our net income. These changes may fluctuate significantly as interest rates, the price of our common shares or the price of commodities fluctuate. This includes changes in the fair value of the Brent linked and the TTF linked derivative instruments.
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Risk of breach of certain debt covenants. Our loan agreements and lease financing arrangements require us to maintain specific financial levels and ratios, including minimum amounts of available cash, minimum ratios of current assets to current liabilities (excluding current portion of long-term debt), minimum levels of stockholders’ equity and maximum loan amounts to value. If certain covenants are breached, we may be required to make further principal repayments ahead of our loan maturity which would reduce our available cash.

Our vessels' net book value may be impaired. Our vessels are reviewed for impairment whenever events or changes in circumstances, such as a sale of one or more of our vessels, indicate that the carrying amount may not be recoverable. In assessing the recoverability of our long-lived assets' carrying amounts, we make assumptions regarding estimated undiscounted future cash flows, such as the vessels' economic useful life and estimates in respect of residual or scrap value. If the market value of our vessels declines, we may be required to record an impairment charge in our financial statements, which could adversely affect our results of operations.

Please see the section of this Annual Report entitled “Item 3. Key Information - D. Risk Factors” for a discussion of certain risks inherent in our business.

Important Financial and Operational Terms and Concepts

We use a variety of financial and operational terms and concepts when analyzing our performance. These include the following:

Liquefaction services revenue. Liquefaction services revenue is generated from the LTA entered into with our customer in relation to the FLNG Hilli. Our provision of liquefaction services capacity includes the receipt of the customer’s gas, treatment and temporary storage on board our FLNG, and delivery of LNG to waiting carriers. We recognize revenue when obligations under the terms of the LTA and its subsequent addendum are satisfied. We have applied the practical expedient to recognize liquefaction services revenue in proportion to the amount we have the right to invoice.

Operating revenues (including revenue from collaborative arrangement). Total operating revenues primarily refers to time and voyage charter revenues. We recognize revenues from time and voyage charters over the term of the charter as the applicable vessel operates under the charter. We do not recognize revenue during days when the vessel is off-hire, unless the charter agreement makes a specific exception. Operating revenues includes revenues from vessels engaged in collaborative arrangements, in the Cool Pool. Specifically, for the Cool Pool, pool earnings (gross earnings of the pool less costs and overheads of the Cool Pool and fees to the Pool Manager) are aggregated and then allocated to the pool participants in accordance with the number of days each of their respective vessels are in the pool during results sharing period.

Voyage, charterhire expenses and commission expenses, net (including expenses from collaborative arrangement).
Voyage expenses, which are primarily fuel costs but which also include other costs such as port charges, are paid by our charterers under our time charters. However, we may incur voyage related expenses during off-hire periods when positioning or repositioning vessels before or after the period of a time charter or before or after drydocking. While a vessel is on-hire, fuel costs are typically paid by the charterer, whereas during periods of commercial waiting time, fuel costs are paid by us. Charterhire expenses refer to the cost of chartering-in vessels to our fleet and commissions relate to brokers' commissions. Furthermore, voyage, charterhire expenses and commission expenses, net includes related net revenue or expenses attributable to the other participants engaged in the collaborative arrangements and pooling arrangements.

Realized and unrealized gain/(loss) on oil and gas derivative instruments. Realized and unrealized gain/(loss) on the oil derivative instrument is the fair value of the oil derivative determined using the estimated discounted cash flows of the additional payments due to us as a result of oil prices moving above a contractual oil price floor over the term of the Hilli's LTA. Realized and unrealized gain on the gas derivative instrument is the fair value of the gas derivative determined using the estimated discounted cash flows of the additional payments due to us as a result of forecast natural gas prices and forecast Euro/USD exchange rates. Significant inputs used in the valuation of the oil and gas derivative instruments include management’s estimate of an appropriate discount rate and the length of time necessary to blend the long-term and short-term oil and gas prices obtained from quoted prices in active markets. The changes in fair value of our oil and gas derivative instruments are recognized in each period within “Realized and unrealized gain/(loss) on oil and gas derivative instruments” as part of the consolidated statement of operations.

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Adjusted EBITDA. Adjusted EBITDA is calculated by taking net income before net income/(loss) from discontinued operations, tax, interest, equity in net (losses)/income/(losses) from equity method investments, unrealized mark-to-market movements on the oil and gas derivative instruments, other non-operating income/(expenses), impairment of long-term assets and depreciation and amortization. Adjusted EBITDA is a financial measure used by management and investors to assess our total financial and operating performance. Management believes that Adjusted EBITDA assists management and investors by increasing the comparability of our total performance from period to period against the performance of other companies.

Interest expense and interest income. Interest expense depends on our and our consolidated lessor VIE entities' overall level of borrowings and all-in borrowing costs, including the amortization of deferred financing costs associated with such borrowings. Given we are deemed to be the primary beneficiary of our lessor VIEs, we have consolidated the VIEs net results into our consolidated results. Although consolidated into our results, we have no control over the funding arrangements negotiated by these lessor VIEs which includes the interest rates to be applied.

Income/(losses) from equity method investments. This includes our share of the income/(losses) from our equity method investments. Affiliates are entities over which we generally have between 20% and 50% of the voting rights, or over which we have significant influence, but do not exercise control or have the power to control the financial and operational policies. These are accounted for by the equity method of accounting. This also extends to entities in which we hold a majority ownership interest, but we do not control, due to the participating rights of non-controlling interests. We record our equity method investment at cost and adjust the carrying amount for our share of the income/(losses) from our equity method investment subsequent to the date of the investment and report the recognized earnings or losses in the statement of income. The excess, if any, of the purchase price over book value of our equity method investment, or basis difference, is included in the consolidated balance sheets as “Equity method investments” amortized through the consolidated statements of operations.

Time charter equivalent (“TCE”). TCE is calculated by taking total operating revenue less liquefaction services revenue, vessel and other management fees and voyage and commission expenses, net divided by calendar days less scheduled off-hire days. It is the typical shipping industry performance measure used primarily to compare period-to-period changes in the shipping fleet's net revenue performance despite changes in the mix of charter types (i.e. spot charters, time charters and bareboat charters) under which the vessel may be employed between the periods. Management believes that TCE assists management in making decisions regarding the deployment and utilization of its shipping fleet and in evaluating financial performance.

Calendar days less offhire days. The calendar days less offhire days for our fleet is the total number of days in a given period that our vessels were in our possession less the total number of days off-hire. We define days off-hire as days lost to, among other things, operational deficiencies, drydocking for repairs, maintenance or inspection, scheduled lay-up, vessel conversions, equipment breakdowns, special surveys and vessel upgrades, delays due to accidents, crewing strikes, certain vessel detentions or similar problems, or our failure to maintain the vessel in compliance with its specifications and contractual standards or to provide the required crew, or periods of commercial waiting time during which we do not earn charter revenue.

Inflation and Cost Increases

Although inflation has had a moderate impact on operating expenses, interest costs, drydocking expenses and overheads, we do not expect inflation to have a significant impact on direct costs in the current and foreseeable economic environment other than potentially in relation to insurance costs and crew costs. LNG transportation is a business that requires specialist skills that take some time to acquire and the number of vessels is increasing. Therefore, there has been an increased demand for qualified crews, which has and will continue to the same extent to put inflationary pressure on crew costs. Only vessels on full cost pass-through charters would be fully protected from crew cost increases. 

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A. Operating Results

Year ended December 31, 2021 compared with the year ended December 31, 2020

On April 15, 2021, we completed the GMLP Merger and the Hygo Merger. Prior to the GMLP Merger and Hygo Merger, we operated in four reportable segments, “Vessel and other operations, “FLNG,” “Power” and “Corporate and other.” The disposal of our interest in Hygo signaled our exit from Power operations and we ceased to consider the Power operations as a reportable segment (as defined under United States Generally Accepted Accounting Principles (“U.S. GAAP”)) with effect from the first quarter of 2021. Consequently, management has therefore concluded that we provide and operate three distinct reportable segments: “Shipping”, “FLNG” and “Corporate and other”. See note 6 “Segment Information” and note 14 “Discontinued Operations” of the audited consolidated financial statements included herein for additional information on our segments and the GMLP Merger and the Hygo Merger, respectively.

Reconciliations of the 2021 and 2020 consolidated net income/(loss) to Adjusted EBITDA are as follows:

December 31,
(in thousands of $)20212020Change% Change
Net income/(loss)560,615 (167,930)728,545 (434)%
Income taxes1,740 981 759 77 %
Income/(loss) before income taxes562,355 (166,949)729,304 (437)%
Depreciation and amortization105,952 107,923 (1,971)(2)%
Unrealized (gain)/loss on oil and gas derivative instruments(179,891)45,100 (224,991)(499)%
Other non-operating losses/(income), net361,928 (5,682)367,610 (6470)%
Interest income(139)(1,572)1,433 (91)%
Interest expense55,163 69,354 (14,191)(20)%
(Gains)/losses on derivative instruments(24,348)52,423 (76,771)(146)%
Other financial items, net759 1,552 (793)(51)%
Income/(losses) from equity method investments
(1,080)538 (1,618)(301)%
Net (income)/loss from discontinued operations(568,049)175,989 (744,038)(423)%
Adjusted EBITDA312,650 278,676 33,974 12 %

Discussed below are our financial statement line items of our consolidated results of operations for the years ended December 31, 2021 and 2020 that are not covered by the segmental analysis presented later in this section:

Depreciation and amortization: Depreciation and amortization decreased by $2.0 million to $106 million for the year ended December 31, 2021 compared to $108 million for the same period in 2020, principally due to:

$0.2 million decrease in LNG Croatia's (formerly the Golar Viking) depreciation which relates to depreciation prior to her entry into the shipyard for conversion to a FSRU. There was no comparable charge in 2021 following her disposal in December 2020;
$0.5 million decrease in the Golar Tundra's depreciation run-rate in 2021 given lower drydocking cost capitalized following her drydock in 2020; and
decrease in depreciation for the year ended December 31, 2021, compared to 2020, as certain components of the vessels' costs with shorter useful economic lives, were fully depreciated in 2020.

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Unrealized (gain)/loss on the oil and gas derivative instruments: The unrealized (gain)/loss on oil and gas derivative instruments increased by $225.0 million to a gain of $179.9 million for the year ended December 31, 2021, compared to a loss of $45.1 million in 2020, principally due to:

Unrealized (gain)/loss on Hilli oil derivative instrument: Relates to the mark-to-market movement on the fair value of the Hilli oil derivative instrument which is determined using the estimated discounted cash flows of the additional payments due to us as a result of Brent oil prices moving above a contractual oil price floor over the remaining term of the LTA. Unrealized (gain)/loss on Hilli oil derivative instrument increased by $172.0 million to a gain of $126.9 million for the year ended December 31, 2021, compared to a loss of $45.1 million for the same period in 2020, due to improvements in the future Brent oil price curves over the LTA's remaining contractual term.

Unrealized gain on Hilli gas derivative instrument: In July 2021, we signed the Hilli Extended Capacity Agreement with the Hilli Customer which resulted in the recognition of a gas derivative asset, linked to the Dutch Title Transfer Facility (“TTF”). The mark-to-market movement on the fair value of our Hilli gas derivative asset was determined using the estimated discounted future cash flows of the additional payments due to us as a result of the future TTF gas prices and forecasted EUR/USD exchange rates. The unrealized gain on the Hilli gas derivative asset resulted in a gain of $51.3 million for the year ended December 31, 2021. There was no comparable gain recognized in 2020.

Unrealized mark-to-market adjustment for commodity swap derivatives: As of December 31, 2021, we were party to commodity swaps to manage our exposure on the 2022 Incremental Capacity on the Hilli which resulted in an unrealized gain of $1.7 million for the year ended December 31, 2021. There was no comparable gain for 2020.

Other non-operating losses/(income), net: Other non-operating losses, net, increased by $367.6 million to $361.9 million for the year ended December 31, 2021 compared to $5.7 million income for the same period in 2020, principally due to:

$295.8 million cumulative unrealized mark-to-market loss on our NFE shares which we received as consideration for the Hygo Merger. There was no comparable loss in 2020;
$71.7 million contingent liability recognized in relation to the expected settlement of the UK tax lease inquiry with HMRC (note 29). There was no comparable contingent liability in 2020;
partially offset by $5.6 million of dividend receipts from NFE; and
the $5.7 million gain on disposal in 2020 relating to the gain on disposal of the converted FSRU vessel LNG Croatia to LNG Hrvatska (note 18). There was no comparable gain in 2021.

Interest income: Interest income decreased by $1.4 million to $0.1 million for the year ended December 31, 2021 compared to $1.6 million for the same period in 2020. The decrease was primarily due to a decrease in the returns on our fixed deposits that had been made during the year ended 2021, and a decrease in the income derived from the lending capital of our lessor VIEs, which we are required to consolidate under U.S. GAAP.

Interest expense: Interest expense decreased by $14.2 million to $55.2 million for the year ended December 31, 2021 compared to $69.4 million for the same period in 2020 due to:

$14.4 million decrease in interest expense arising on the loan facilities of our consolidated lessor VIEs following scheduled capital repayments;
$8.5 million decrease in interest expense relating to the refinancing of the Golar Bear facility with AVIC International Leasing Company Limited (“AVIC”) and the repayments in 2020 of the Golar Viking facility, the Margin Loan facility and the Term Facility (see note 21 “Debt” of our consolidated financial statements included herein for more information);
$1.7 million decrease in amortization of deferred financing costs following repayments of the Golar Viking facility and the Margin Loan facility in 2020, and the amendments of our four vessels' sale and leaseback debts with ICBC Finance Leasing Co. Ltd (“ICBCL”) in 2021; and
$1.6 million decrease in interest expense on the Golar Arctic and the Golar Frost facilities due to a reduction in LIBOR.

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This decrease in interest expense was partially offset by:

$8.2 million increase in interest expense relating to the Norwegian Bonds and the Revolving Credit Facility (“RCF”) entered in October 2021 and December 2020, respectively; and
$4.0 million decrease in capitalized interest on borrowing costs in relation to our qualifying investments in Hygo (subsequently disposed of) and Avenir. Hygo's Sergipe Power Plant commenced operations in late March 2020, and Avenir's first vessel was delivered in October 2020, resulting in the cessation of capitalizing interest.

Gains/(losses) on derivative instruments: Gains/(losses) on derivative instruments increased by $76.8 million to a gain of $24.3 million for the year ended December 31, 2021 compared to a loss of $52.4 million for the same period in 2020. The change is primarily due to:

Mark-to-market adjustment for interest rate swap derivatives: As of December 31, 2021, we have an interest rate swap portfolio with a notional value of $505.0 million (2020: $597.5 million), none of which are designated as hedges for accounting purposes. Net unrealized gains on the interest rate swaps increased to a gain of $27.0 million for the year ended December 31, 2021 compared to an unrealized loss of $38.6 million for the same period in 2020. The unrealized gains were due to the increase in the long-term swap rates, partially offset by a decrease in the notional value of our swap portfolio and fair value adjustments reflecting our creditworthiness and that of our counterparties for the year ended December 31, 2021. Realized losses on our interest rate swaps decreased to a loss of $2.9 million for the year ended December 31, 2021, compared to a loss of $6.2 million for the same period in 2020, due to a reduction in LIBOR for the year ended December 31, 2021.

Mark-to-market adjustment for equity derivative: In December 2014, we established a three-month facility for a Stock Indexed Total Return Swap Program (“Total Return Swap”) or Equity Swap Line with DNB Bank ASA in connection with a share buyback scheme. In February 2020, we repurchased the remaining 1.5 million of our shares and 0.1 million of Golar Partners' units underlying the equity swap which terminated the Total Return Swap. The equity swap derivatives mark-to-market adjustment resulted in a net loss of $5.1 million recognized in the year ended December 31, 2020. There was no comparable loss recognized in the comparable period in 2021.

Other financial items, net: Loss on other financial items, net decreased by $0.8 million to a loss of $0.8 million for the year ended December 31, 2021, compared to loss of $1.6 million for the same period in 2020 due to favorable foreign exchange movement of $2.8 million, partially offset by a decrease in the amortization of debt guarantees of $1.5 million following the disposal of our interest in Hygo.

Income/(losses) from equity method investment: Income/(losses) from equity method investments represents our share of earnings/(losses) from our equity accounted investments in Egyptian Company for Gas Services S.A.E (“ECGS”) and Avenir. The increase of $1.6 million compared to 2020 was largely due to the net income from Avenir.

Net income/(loss) from discontinued operations:
December 31,
(in thousands of $)20212020Change% Change
Share of net earnings/(losses) of Golar Partners8,116 (136,832)144,948 (106)%
Share of net losses of Hygo
(15,008)(39,157)24,149 (62)%
Gain on disposal of equity method investments
574,941 — 574,941 100 %
Net income/(loss) from discontinued operations568,049 (175,989)744,038 (423)%

On April 15, 2021, we completed the disposals of our interests in Golar Partners and Hygo to NFE. The net income from discontinued operations for the year ended December 31, 2021, consists of our share of earnings/(losses) from discontinued operations until April 15, 2021 and the resultant gain on disposal of our equity method investments of $574.9 million, which represents the excess consideration over the book value of our equity accounted investments disposed of.

As of December 31, 2020, we held a 32.2% ownership interest in Golar Partners (including our 2% general partner interest) and 100% of the incentive distribution rights (“IDRs”). We recognized an impairment charge of $135.9 million due to the duration and extent of the suppressed unit price of Golar Partners and we concluded that the difference between the carrying value and the fair value of our equity accounted investment was no longer temporary.

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As of December 31, 2020, we held a 50.0% ownership interest in Hygo. Our share in net losses of Hygo principally relates to trading activities of the Golar Celsius and the Golar Penguin operating as LNG carriers and the performance of the Sergipe Power Plant, including the Golar Nanook operating as a FSRU, regasifying LNG for the Sergipe Power Plant. The decrease in our share of net losses in Hygo was mainly driven by our share of the one-off non-cash loss on the deemed disposal of the Golar Nanook following the commencement of her 25-year sales type lease with Centrais Eléctricas de Sergipe S.A. (“CELSE”) in 2020.

The following details the operating results and Adjusted EBITDA for our reportable segments for the years ended December 31, 2021 and 2020.
December 31, 2021December 31, 2020
(in thousands of $)ShippingFLNGCorporate and otherTotalShippingFLNGCorporate and otherTotal
Total operating revenues202,968 221,020 27,777 451,765 191,881 226,061 20,695 438,637 
Vessel operating expenses(57,010)(51,196)(12,119)(120,325)(57,326)(52,104)504 (108,926)
Voyage, charterhire and commission expenses, net(10,340)(600)166 (10,774)(12,634)— — (12,634)
Administrative expenses(644)(397)(33,980)(35,021)(2,211)(1,672)(31,428)(35,311)
Project development expenses— (2,974)187 (2,787)(112)(2,793)(5,986)(8,891)
Realized gain on oil derivative instrument— 24,772 — 24,772 — 2,539 — 2,539 
Other operating income5,020 — — 5,020 3,262 — — 3,262 
Adjusted EBITDA139,994 190,625 (17,969)312,650 122,860 172,031 (16,215)278,676 

Shipping segment
December 31,
(in thousands of $, except average daily TCE)20212020Change% Change
Total operating revenues202,968 191,881 11,087 %
Vessel operating expenses(57,010)(57,326)316 (1)%
Voyage, charterhire and commission expenses, net(10,340)(12,634)2,294 (18)%
Administrative expenses(644)(2,211)1,567 (71)%
Project development expenses— (112)112 100 %
Other operating income5,020 3,262 1,758 54 %
Adjusted EBITDA139,994 122,860 17,134