Anticipating making a final investment decision (FID) later this year, NextDecade Corp. made a deal with Guangdong Energy Group Natural Gas Co. Ltd. to supply LNG for 20 years from its Rio Grande LNG export project in Brownsville, Texas.
Guangdong Energy, one of the largest power producers in China, will purchase up to 1.5 mtpa of LNG indexed to Henry Hub. The LNG will initially be supplied from train one of Rio Grande LNG, which is expected to start commercial operations in 2026. The sale and purchase agreement is expected to be completed in Q2 2022.
Matt Schatzman, NextDecade's chairman and CEO said this is the "second foundation customer" of Rio Grande and its first Chinese customer.
The two companies may also be working together in carbon capture and storage, according to Zhu Zhanfang, chairman of Guangdong Energy Natural Gas Co.
"Henry Hub-linked LNG will be an important part of our LNG portfolio as we transit to a greener future and optimize our resource procurement,” he said. “We look forward to a long-lasting and fruitful cooperation with NextDecade, not necessarily just in LNG supply, but potentially in carbon capture and storage as well.”
Last year, NextDecade announced announced its wholly owned subsidiary, NEXT Carbon Solutions, is developing one of the largest carbon capture and storage (CCS) projects in North America at Rio Grande LNG. The project project is expected to enable the capture and permanent geologic storage of more than 5 million tonnes of CO2 per year. The LNG provider also joined forces with Project Canary on a pilot project for monitoring, reporting, and independent third-party measurement and certification of greenhouse gas intensity of LNG to be sold from the export facility.
In a February corporate presentation, NextDecade said it has raised more than $350 million to date. Investors include Bechtel, Mubadala, Baker Hughes, OGCI Climate Investments, York Capital Management, Bardin Hill, Energy & Power Transition Partners, Valinor Management, BlackRock, and others.
The first customer was Shell, which signed a 20-year LNG sale and purchase agreement in 2019 for 2 mtpa. Three-quarters of the LNG volumes will be indexed to Brent and 25% of the volumes indexed to US gas indices, including Henry Hub. NextDecade said, "The SPA is the first-ever long-term contract with LNG produced out of the United States to be indexed to Brent and comes with full destination flexibility."
NextDecade's FID is dependent on securing additional contracting and financing. The capacity of the planned five-train facility is projected to be 27 mtpa. The news of the Chinese deal boosted NextDecade's shares by double digits, according to The Motley Fool, adding, "Securing contracts is only one hurdle. The company will also need to raise billions of dollars in capital to finance the project and the associated carbon capture and storage solution it also aims to develop.
