NextDecade Corporation announced it has made a positive final investment decision (FID) to construct the first three liquefaction trains (Phase 1) at the Rio Grande LNG (RGLNG) export facility in Brownsville, Texas.
The $18.4 billion project financing for RGLNG Phase 1 is the largest greenfield energy project financing in U.S. history and underscores the critical role that LNG and natural gas will continue to play in the global energy transition. Industry experts expect a global shortfall of LNG before 2030, which if not addressed by projects such as RGLNG, may result in a prolonged reliance on other more carbon intensive fuels such as coal and oil.
In conjunction with making a positive FID, RGLNG issued the notice to proceed (NTP) to Bechtel Energy Inc. (Bechtel) to begin construction of Phase 1 under its lump-sum turnkey engineering, procurement and construction contracts (EPC). The final EPC cost at NTP is approximately $12.0 billion. The remaining expected project costs to be covered by the financing that closed recently are: owner's costs and contingencies of approximately $2.3 billion, dredging for the Brazos Island Harbor Channel Improvement Project, conservation of more than 4,000 acres of wetland and wildlife habitat area and installation of utilities of approximately $600 million and interest during construction and other financing costs of approximately $3.1 billion.
Phase 1, with nameplate liquefaction capacity of 17.6 MTPA, has 16.2 MTPA of long-term binding LNG sale and purchase agreements (SPAs) 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.
"Achieving FID and issuing NTP on RGLNG Phase 1 is a landmark event reflecting years of hard work and dedication by NextDecade's employees, shareholders, construction partners, equipment suppliers, and customers," said Matt Schatzman, NextDecade's chairman/CEO. "I want to specifically recognize 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."
"Achieving FID is an important milestone in NextDecade's mission of becoming a reliable supplier of low-carbon LNG that will replace coal with a cleaner source of energy," said Bayo Ogunlesi, chairman/CEO of Global Infrastructure Partners. "Our investment in RGLNG affirms GIP's commitment to promoting decarbonization, energy security and energy affordability."
"We are delighted with this final investment decision that enables us to launch the construction of this new LNG liquefaction plant in the United States, to which TotalEnergies will contribute its expertise in the development of major LNG projects," said Patrick Pouyanné, chairman/ CEO of TotalEnergies. "This project gives TotalEnergies access to competitive LNG thanks to its low production costs. LNG from this first phase will boost TotalEnergies U.S. LNG export capacity to over 15 MTPA 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."
"Today's announcement marks a pivotal milestone in Mubadala's enduring partnership with NextDecade in the development of RGLNG," said Khaled Abdulla Al Qubaisi, CEO of Mubadala's Real Estate & Infrastructure Investments platform. "Mubadala is delighted to welcome GIP, GIC and TotalEnergies into the partnership as RGLNG enters its next phase of development."
"NextDecade is on a mission to produce lower-carbon intensive LNG for its customers, and we're honored to be their partner," said Paul Marsden, president of Bechtel Energy. "Today, as we commence engineering, procurement, and construction on the first phase of this project, we reaffirm our commitment to the community through quality jobs, training, and support for the supply chain and small businesses."
Under the joint venture agreement executed today, NextDecade will hold equity interests that entitle the Company to receive up to 20.8 percent of the cash flows generated by Phase 1 during operations. Financial Investors and TTE will hold equity interests that entitle them to a minimum of 62.5 percent and 16.7 percent of the cash flows generated by Phase 1 during operations, respectively.
As part of the transaction, Financial Investors and TTE each have options to invest in RGLNG Train 4 and Train 5 equity and options to invest in the planned carbon capture and sequestration project at RGLNG. TTE's right to invest in Train 4 and Train 5 is conditioned on exercising their LNG purchase rights of 1.5 MTPA in each of Train 4 and Train 5.
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