Rio Grande Still Set for 2021 FID: NextDecade
NextDecade has told NGW it is still on track to take a final investment decision (FID) on the first phase of its 27mn metric ton/year Rio Grande LNG export project in Texas this year, despite setbacks securing customers for its gas supplies.
The US LNG developer had hoped to approve the construction of at least two of Rio Grande's five trains in 2020 but delayed the decision last May because of the impact of the Covid-19 pandemic on the global gas market. It still expects to clear the milestone in 2021, Patrick Hughes, NextDecade's senior vice president for strategy and business development, told NGW.
"NextDecade is engaged with a significant number of prospective customers that represent the global nature of the LNG business," Hughes said, noting that company policy meant he could not provide details of commercial negotiations. "This means multiple customers in Europe, as well as in Asia, South America, and the Middle East – all places where LNG is currently consumed."
Despite headwinds created by the pandemic, Hughes said recent price strength in Asia and Europe showed that the LNG market was tightening.
"With only approximately 8mn mt/yr of additional LNG capacity to be added annually from 2021 and 2024, we expect the market to tighten further," he said. "The world needs substantially more LNG and NextDecade’s Rio Grande LNG project is well-positioned to help solve this growing problem."
Setbacks
NextDecade reached a deal with Shell in 2019 for the supply of 2mn mt/yr of LNG from Rio Grande over 20 years. First bidders generally secure good prices to attract more customers. But it has had difficulty bringing on board other customers. France's Engie ended talks in November on a contract for reportedly 2.9mn mt/yr of annual supplies from the project, because of opposition from the French government. Reports claimed the main concern was the life cycle of the methane that Rio Grande is set to receive from fields in West Texas and New Mexico.
The company agreed a memorandum of understanding (MoU) with authorities in the Irish port of Cork in 2017 on plans for the 4bn m3/yr Inisfree floating storage and regasification unit (FSRU) that would receive Rio Grande's gas. But the deal expired at the end of last year, amid growing antipathy in Ireland towards LNG imports.
"Due to the increased uncertainty in Ireland's evolving policies regarding the importation of LNG, NextDecade has elected to suspend development activities related to the Inisfree FSRU project in the port of Cork," Hughes said. But he stressed that the project's cancellation had no bearing on the FID target.
"NextDecade has never linked a successful FID of Rio Grande LNG to Inisfree," he said.
Ireland's coalition government, formed last summer between Fianna Fail, Fine Gael and the Green Party, has said it will block any LNG import projects set to receive US fracked gas. The government has also taken aim at domestic gas supply, banning the issue of new licences for gas exploration and production. This followed a 2019 pledge by the previous Fine Gael government to block oil exploration.
Shortly after taking power, the coalition also removed the planned 5bn m3/yr Shannon LNG terminal from a list of schemes eligible for EU grants. Ireland's high court then ruled in November to annul all development approvals for the project, sealing its fate. NextDecade had hoped to supply Shannon LNG as well.
Faced with this hostility towards US gas, NextDecade announced plans in October to make Rio Grande operate with net-zero emissions, primarily by using carbon, capture and storage (CCS) technology.
"We are targeting carbon neutrality at Rio Grande LNG with the use of CCS," Hughes said. "In partnership with certain US producers who will supply gas to Rio Grande LNG, we believe we will be able to supply our customers LNG with some of the lowest greenhouse gas intensity."