NextDecade keeps 2021 target for sanctioning proposed US liquefaction terminal

Houston — NextDecade is sticking to plans to make a final investment decision in 2021 for its proposed Rio Grande LNG export project amid the hope that it will overcome challenges in its commercial efforts to support the Texas terminal, a company executive said during an industry conference Sept. 30.

The comments by James MacTaggart, NextDecade's senior vice president of LNG marketing for Asia and the Middle East, during the virtual FT Commodities Global Summit come in a year filled with delays and market uncertainty for North American LNG developers due largely to demand destruction from the coronavirus pandemic.

NextDecade has pushed its project timeline several times, most recently in May when it said FID would occur next year. To date, Shell 's 20-year agreement to buy 2 million mt/year of supply from Rio Grande LNG is the only firm offtake deal tied to the terminal that NextDecade has announced. NextDecade has said it needed to sell another 9 million mt/year of supply under long-term contracts to achieve FID on two or three trains at its site in Brownsville.

"We have financing that we have based on expectations of where our contracts will end up firmed up, so it really comes down to aggregating provisions, long-term contracts to underpin the final investment decision," MacTaggart said. "And that is taking longer than we had expected and hoped, but I think we'll be there next year."

The original plan for Rio Grande LNG called for six trains each capable of producing 4.5 million mt/year of LNG. Thanks to engineering optimizations, NextDecade now believes it can achieve an average of 5.4 million mt/year of LNG per train, allowing it to drop a sixth train and reap the same total output. US regulators granted permission in August for the redesign.

While global LNG demand slumped over the summer due to the coronavirus, activity has picked up in recent weeks thanks to higher prices in key end-user markets. NextDecade is banking its commercial efforts on an expected continuation of the demand recovery into next year.

"I think we have to separate out the dislocation at the moment from the strong factors of demand growth over time and that's why I think there's a need for projects like ourselves to take FID, to have supply available in the 2025 timeframe and beyond," MacTaggart said.

Exelon-backed Annova LNG's 6.5 million mt/year project and Glenfarne Group's Texas LNG, expected to include 2 million mt/year of capacity in its first phase, are also proposed to be built in Brownsville. Neither one has reached FID.