With its latest sales and purchase agreement (SPA) with Galp Trading SA, NextDecade Corp. is targeting a final investment decision for its Rio Grande LNG terminal early next year.
Houston-based NextDecade disclosed Tuesday that it has inked a 20-year, 1 million metric ton/year (mmty) SPA at prices linked to Henry Hub with the unit of Galp Energia SGPS SA. The Portuguese energy firm has a modest LNG trading portfolio mostly supplied by long-term contracts from Venture Global LNG Inc.’s Calcasieu Pass LNG in Louisiana and Nigeria LNG.
Galp is the second European firm to sign an agreement for offtake from the 27 mmty capacity terminal as NextDecade progresses the first phase of its project.
"We look forward to helping Galp, as well as other European companies and their customers, meet their energy needs by offering a lower-cost, reliable source of LNG with lower carbon-intensity," CEO Matt Schatzman said.
NextDecade’s design for the first phase of the Brownsville, TX project consists of three trains with around 16 mmty of LNG capacity. The company indicated in a statement it could focus on a final investment decision for the remaining two trains and development of a related carbon capture and storage (CCS) project sometime after launching phase one.
With the Galp SPA, the firm currently has 9.75 mmty capacity under contract, according to data from Kpler Inc., after a spree of deals this year, mostly with Chinese firms.
The deal is also the latest to bring more LNG to Europe after a stretch of activity this year that was largely dominated by Asian offtakers. A unit of the UK’s Ineos Group Ltd. and France’s Engie SA both signed long-term deals this month for U.S. LNG, while ConocoPhillips signed a deal with QatarEnergy last month to move more volumes to Germany.
Poten & Partners’ Jason Feer, global head of business intelligence, told NGI new deals with European firms could be considered a “positive” sign for long-planned projects as developers deal with possible headwinds.
With inflation and supply chain issues impacting engineering costs, higher interest rates and historically tight labor markets, Feer said some developers have had to reassess whether the liquefaction fees in their contracts could cover their debt burdens.
“It is our understanding that some sellers have reopened pricing discussions with offtakers to attempt to address this issue,” Feer said.
Analysts have also questioned projects with a dependence on Chinese offtakers, Feer said, as signs of increased pipeline gas from Central Asia and Russia combined with declining LNG imports over the past year imply a possible decline in U.S. LNG demand. Feer said that Poten estimates Chinese demand for LNG could continue to grow over the decade, but perhaps at a slower pace.
