NextDecade extends agreements with contractor for proposed US LNG terminal

Houston — NextDecade extended agreements with its construction contractor that will give it more breathing room as it tries to secure sufficient commercial support to sanction its up to 27 million mt/year Rio Grande LNG export project in South Texas.

The extension, disclosed in a statement March 8, keeps the pricing in the engineering, procurement and construction contract with Bechtel in place until Dec. 31 and the EPC contract, itself, valid until July 31, 2022.

NextDecade's cost would continue to be $600/mt, or a total of $7.04 billion, if it initially moves forward with two of the five proposed liquefaction trains, while its cost would be $543/mt, or a total of $9.57 billion, if it makes a positive final investment decision on three trains, according to an investor presentation posted on the company's website. It expects the cost per ton to be reduced further if it builds all five trains currently proposed. The total cost figures include storage tanks and marine berths.

FID on at least two trains, which has been delayed several times, is currently targeted for 2021.

North American developers of liquefaction capacity were struggling before the coronavirus pandemic took hold in early 2020 to secure sufficient commercial support to finance construction of their facilities. Those challenges have persisted since vaccines started to be rolled out toward the end of 2020, though some US developers have said recently there has been renewed interest in talks over long-term term contracts due to volatility in the global market

To date, Shell's 20-year agreement to buy 2 million mt/year of supply from Rio Grande LNG, announced in April 2019 during a conference in China, is the only firm ofttake deal tied to the terminal that NextDecade has announced. In November 2020, France's Engie said it halted talks over a potential long-term supply agreement with NextDecade, amid pressure from environmental groups not to import LNG produced from shale gas.

In the latest investor presentation, NextDecade said it was "working on remaining commercial agreements needed to achieve FID," and it described counterparty engagement as "strong."

As originally envisioned, Rio Grande LNG was expected to have up to six liquefaction trains in Brownsville that were each capable of producing 4.5 million mt/year. NextDecade abandoned the proposed sixth train last summer, saying that technology enhancements would allow it to achieve the same total capacity with five units and reduce the terminal's carbon footprint.

In January, NextDecade scrapped plans for a second LNG export terminal near Galveston, saying the site it was considering was not suitable for development.