NextDecade deal with Chinese utility lifts Rio Grande LNG commercial momentum

NextDecade reached a preliminary long-term agreement under which Chinese utility Guangdong Energy will buy up to 1.5 million mt/year of supply from the US liquefaction terminal developer's proposed Rio Grande LNG terminal in Texas, the companies said in a joint statement March 24.

The heads of agreement calls for the companies to complete a firm 20-year sale and purchase agreement in the second quarter.

The volumes will be indexed to the US Henry Hub. They will initially be lifted from Rio Grande LNG Train 1, which NextDecade expects to start commercial operations in 2026.

A final investment decision on building at least two of five trains at the up to 27 million mt/year capacity facility in Brownsville is expected in the second half of 2022, assuming achievement of further LNG contracting and financing, NextDecade said. The project's first phase is expected to account for around 11 million mt/year of capacity.

NextDecade's only other SPA to support its project is a 20-year deal with Shell, signed in 2019, that calls for the European energy major to buy 2 million mt/year of supply from Rio Grande LNG. In November 2020, France's Engie said it halted talks over a potential long-term supply agreement with NextDecade.

In 2021 and during the first several months of 2022, there has been a flurry of commercial activity tied to current and proposed US LNG export terminals. The main beneficiaries have been Cheniere Energy and Venture Global LNG, especially with Chinese buyers as high spot prices in end-user markets have spurred new term deals that carry a lower fixed price. Two proposed US projects were scrapped in 2021 -- Pembina's Jordan Cove in Oregon and Exelon-backed Annova LNG, which was to be built in Brownsville near NextDecade's proposed site.

In the March 24 statement, the chairman of Guangdong Energy Group Natural Gas Co. said his company's business relationship with NextDecade potentially could eventually extend to carbon capture and storage. NextDecade has said it plans to advance a carbon capture and storage project shortly after it sanctions the first phase of the liquefaction terminal.