JERA signs long-term deal for 2 mil mt/year from NextDecade's Rio Grande LNG expansion

Rio Grande LNG developer NextDecade said it signed a binding long-term supply deal with Japan's JERA for 2 million mt/year, marking the first firm offtake contract tied to a proposed fifth liquefaction train at the Texas facility.

Under the sale and purchase agreement announced on May 29, JERA will buy the volumes on a free-on-board basis at a price indexed to Henry Hub for 20 years. The announcement followed NextDecade saying earlier this month that it expected to "imminently" launch the financing process for Train 4 as it nears a final investment decision on the project.

JERA is one of the world's top LNG buyers, and the SPA represents significant commercial support for the Train 5 expansion.

"We are pleased to announce JERA, the largest power generator in Japan and a long-established LNG market leader, as a customer for Rio Grande LNG Train 5," NextDecade CEO Matt Schatzman said in a statement. "We have seen strong commercial momentum this year for Rio Grande LNG, which is helping us commercialize Train 5 toward a positive FID."

NextDecade said a positive FID on Train 5 would be subject to securing sufficient commercial deals, entering an engineering, procurement and construction agreement and obtaining adequate financing to construct the project.

NextDecade reached an FID on the first 17.6 million mt/year phase of the project in 2023. The two expansion trains the company is working to commercially sanction would bring the terminal's production capacity to about 27 million mt/year.

The developer in April said that it had sufficient commercial support to build Train 4. It did so after securing three 20-year deals covering a total of 4.6 million mt/year of supply from the liquefaction unit -- a 1.2 million mt/year deal with Saudi Aramco and a 1.9 million mt/year contract with the UAE's Abu Dhabi National Oil Co., followed by France's TotalEnergies exercising its option for 1.5 million mt/year.

Put differently, NextDecade signed about 85% of Train 4 capacity under firm offtake contracts before saying it had secured the commercial support it needed to reach an FID, based on an assumed nameplate capacity of 5.4 million mt/year.

TotalEnergies also has an option for 1.5 million mt/year for Train 5. The French energy giant, which is the biggest offtaker of US LNG, was a major backer of the initial project under construction in Texas. It signed a 5.4 million mt/year offtake deal, in addition to taking an equity stake in the project and in NextDecade.

NextDecade did not provide a timeframe for when it expects to reach an FID on either expansion train. The company, on May 29, did not answer questions about its targeted timeframe for reaching an FID, referring to a previous statement.

The deal with JERA followed the Japanese government saying it would look to increase the country's imports of US LNG as part of ongoing trade negotiations with the White House. JERA CEO Hisahide Okuda said in a February interview that the company would look to secure more US LNG supply as it looks to build a portfolio of flexible and reliable suppliers beyond 2030, supported by the position of the super-chilled fuel under Japan's new Strategic Energy Plan.

"Basically, I believe that an increase in US supply is positive, considering energy security," Okuda told Platts, part of S&P Global Commodity Insights. "Taking into account the current portfolio, we think that the proportion of US [supply] is relatively low from a balanced perspective, so we believe it would be good to increase this."

Speaking to Platts on May 30, a JERA spokesperson said the SPA with NextDecade was part of the company's ongoing efforts to develop a diverse LNG supply portfolio and enhance its ability to respond to changes in the business environment and risks.

JERA is also working to "rebalance" its LNG procurement sources, half of which are currently shared by the Asia and Oceania region, the spokesperson said, adding that the company also intends to hold talks with suppliers in the Middle East in a bid to "further diversify our LNG portfolio."

Japan imported 6.34 million mt of US LNG in 2024, accounting for 9.6% of the country's total imports of 65.89 million mt, according to Ministry of Finance data.

Also on May 29, Japan's Kyushu Electric announced signing a 20-year SPA to purchase up to 1 million mt/year of LNG from Energy Transfer's proposed Lake Charles project in Louisiana on an FOB basis.

Next week, Japanese officials, along with officials from South Korea, are expected to attend an energy conference in Alaska with US Cabinet officials.

NextDecade was forced in 2024 to delay plans for an FID on Train 4 after a federal appeals court returned a key construction permit to the US Federal Energy Regulatory Commission for further review. NextDecade is getting closer to overcoming that setback, with a decision from FERC expected by November.