NextDecade says Rio Grande LNG commercial talks progressing ahead of FID

Houston — NextDecade is keeping to its current target to sanction this year the construction of at least two trains at its proposed Rio Grande LNG export terminal in Texas, according to a new investor presentation posted on the developer's website.

To date, it has secured a single long-term contract, with Shell, covering 2 million mt/year of the about 11 million mt/year of supply that is expected to make up the first phase of the project in Brownsville. The full project, as currently proposed, would involve five trains and 27 million mt/year of capacity.

In the presentation, NextDecade said it is progressing commercial negotiations with "multiple counterparties" to enable an initial final investment decision in 2021. The presentation did not elaborate on the talks, and a spokesman did not respond to a message seeking comment May 14.

In November 2020, France's Engie said that it had halted talks with NextDecade about a supply deal tied to Rio Grande LNG. European utilities face pressure from environmental interests to refrain from signing new long-term deals for importing US shale gas.

Since Engie's announcement, NextDecade has launched several initiatives designed to reduce Rio Grande LNG's greenhouse gas emissions profile.

It plans to advance a carbon capture and storage project shortly after it sanctions the first phase of the liquefaction terminal. NextDecade is also partnering with a Colorado company to measure and report the GHG intensity of the LNG to be produced at the export facility. The goal of the reporting initiative includes enabling the development of responsibly sourced natural gas from producers in the Permian Basin and Eagle Ford shale that will be fed to the terminal.

While a surge in shipments from existing US LNG terminals continues amid strong near-term market fundamentals, most developers of new facilities have continued to struggle to secure sufficient commercial support to advance their projects.

In March, Exelon-backed Annova LNG canceled its proposed liquefaction project in Brownsville, which would have been built along the same channel where NextDecade has proposed to build Rio Grande LNG. Canada's Pembina paused the development of its proposed Jordan Cove LNG project in Oregon in April and Sempra Energy said earlier in May that it would likely delay a final investment decision on its proposed Port Arthur LNG project in Texas to 2022, from a previous target of 2021.

In its latest investor presentation, NextDecade said that in the years ahead a supply shortfall is increasingly likely now that some projects "'are being 'pushed to the right' due to COVID-19 or other disruptions." Analysts believe that developers that are able to hang on through the market disruption could benefit commercially.