NextDecade Declares FID To Launch Rio Grande LNG First Phase

The $18.4 billion in project financing pledged to Rio Grande LNG represents the largest greenfield energy project financing commitment in US history.

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The Incheon LNG receiving terminal in South Korea, a fast-growing destination for Asia-bound US LNG.
Source: Kogas

NextDecade has taken a final investment decision (FID) together with its partners to initiate Phase 1 of the Rio Grande LNG (RGLNG) export facility in Brownsville, Texas, after having raised $18.4 billion in project financing—the largest greenfield energy project financing commitment in US history, according to the company.

The Houston-based energy company, whose subsidiaries include RGLNG and NEXT Carbon Solutions, said in its 12 July announcement it had

  • Executed and closed a joint venture agreement for Phase 1 containing financial commitments of nearly $5.9 billion from the following investors: Global Infrastructure Partners, Singapore’s sovereign fund manager GIC, the UAE’s Mubadala Investment Company, and TotalEnergies.
  • Committed to invest approximately $283 million in Phase 1 including $125 million of pre-FID capital investments.
  • Closed senior secured non-recourse bank credit facilities of $11.6 billion, consisting of $11.1 billion in construction term loans and a $500 million working capital facility.
  • Closed a $700-million senior secured non-recourse private placement notes offering.

Along with greenlighting FID, RGLNG also gave Bechtel Energy Inc. notice to proceed with construction under lump-sum turnkey engineering, procurement, and construction contracts announced in early July.

Scheduled for commissioning in 2027, the Brownsville facility has already committed 92% (16.2 mpta) of its 17.5 mpta Phase 1 nameplate capacity to long-term binding LNG sale and purchase agreements concluded with TotalEnergies, Shell NA LNG LLC, ENN LNG Pte Ltd, Engie S.A., ExxonMobil LNG Asia Pacific, Guangdong Energy Group, China Gas Hongda Energy Trading Co., Galp Trading S.A., and Itochu Corporation.

TotalEnergies is the world’s third-largest LNG player with a market share of around 12% and a global portfolio nearing 50 mtpa. It is integrated across the LNG value chain, including production, transportation, access to more than 20 mtpa of regasification capacity in Europe, trading, and LNG bunkering.

Participation in Rio Grande LNG furthers the French company’s stated goal to increase the share of natural gas in its sales mix to 50% by 2030, considering that through the project TotalEnergies has

  • Acquired a 16.67% stake in the Phase 1 joint venture (JV) and will participate in its equity contributions, for a total amount of $1.1 billion.
  • Will hold a 17.5% stake in NextDecade for a total of $219 million. A first tranche of 5.06% was acquired in June, a second tranche will be acquired following FID to increase this stake to 12.47%, and a third tranche of 5.03 % shall be acquired before the end of 2023.
  • Obtained rights to offtake 5.4 mtpa of LNG from Phase 1 for 20 years.
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Rio Grande LNG site overview, FID presentation.
Source: NextDecade

Commenting on the decision to proceed with the project, Patrick Pouyanné, chairman and CEO of TotalEnergies, said, “The project gives TotalEnergies access to competitive LNG, thanks to its low production costs.

“LNG from this first phase will boost TotalEnergies’ US LNG export capacity to over 15 mpta by 2030, and thus our ability to contribute to European gas security and to provide customers in Asia with an alternative form of energy that is half as emissive as coal.”

Terms of the Phase 1 transaction give financial investors and TotalEnergies options to invest in future fourth and fifth LNG trains as well as in a carbon capture and sequestration project Next Carbon Solutions, a subsidiary of NextDecade, is developing to potentially store up to 5 mtpa (90%) of CO2 emissions from Rio Grande’s LNG operations.

TotalEnergies’ right to invest in Train 4 and Train 5 is conditioned on exercising its LNG purchase rights of 1.5 mpta from each train. The company believes these options with its partners will enable NextDecade to deliver the full FERC-approved five-train RGLNG project with an overall capacity of 27 mpta over time, TotalEnergies said in its press release.

Under the JV agreement, NextDecade will hold equity interests that entitle it to receive up to 20.8% of the cash flows generated by Phase 1 during operations. Financial investors and TotalEnergies will hold equity interests that entitle them to a minimum of 62.5% and 16.7% of the cash flows generated by Phase 1 during operations, respectively, NextDecade reported.

Matt Schatzman, NextDecade’s chairman and CEO called the FID announcement “a landmark event reflecting years of hard work and dedication by various stakeholders in the Rio Grande Valley community, the Port of Brownsville and the countless leaders and officials at the local, state, and federal levels that have supported us throughout the development of RGLNG Phase 1.”

Feed gas for the Rio Grande LNG terminal will be supplied through the Rio Bravo Pipeline (RBPL) and the Valley Crossing Pipeline (VCP).

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RGLNG will be supplied with gas from the dedicated Rio Bravo Pipeline and the existing Valley Crossing Pipeline that crosses into Mexico.
Source: NextDecade

The US energy infrastructure company Enbridge Inc. has agreed to build and operate the RBPL as a dedicated line to transport gas to Rio Grande LNG from the Permian Basin, Eagle Ford Shale, and other producing areas, according to NextDecade’s FID presentation to investors.

Enbridge owns the VCP which currently exports gas to Mexico, but its 2.6 Bcf/D capacity is only 50% utilized. About 20% of natural gas consumed in the US moves through the Enbridge network.