NextDecade Delays Rio Grande LNG Final Investment Decision to 2021

(Reuters) — U.S. liquefied natural gas (LNG) developer NextDecade Corp said on Monday it will not decide whether to build the proposed Rio Grande LNG export plant in Texas until 2021 as demand destruction from the coronavirus affects the global LNG market. 

Rio Grande LNG Rendering Photo: NextDecade

The company, which announced the delay along with its first-quarter earnings, said as recently as May 11 that it still planned to make that final investment decision this year.

Rio Grande is one of several North American LNG projects delayed this year as government lockdowns to stop the spread of the coronavirus cut global demand for natural gas and other forms of energy.

Over the past month or so, Sempra Energy delayed its decision on building the proposed Port Arthur LNG export plant in Texas until 2021. Cheniere Energy Inc, the biggest U.S. LNG producer, also signaled it may not make a final investment decision to expand its Corpus Christi export plant in Texas until 2021.

At the start of this year, 12 companies, including Sempra, Cheniere and NextDecade, said they planned to make final investment decisions in 2020. That total is now down to just four. Analysts said it was likely that only one of those projects would actually go forward this year. 

Shares of NextDecade were up 16.7% to $1.40.

Analysts at U.S. financial services firm Cowen & Co said the market was not surprised by NextDecade's delay. Cowen said it assumes the company will not make a decision until 2022. 

NextDecade said it has a 20-year agreement with a unit of Royal Dutch Shell Plc to sell 2 million tonnes per annum of LNG from Rio Grande.

NextDecade said in its earnings it can achieve a final investment decision with an additional 9 million tonnes per annum of capacity sold under long-term contracts.

The company currently has a contract with engineering firm Bechtel to build two liquefaction trains for $7.042 billion or three trains for $9.565 billion. Each train can produce about 5.87 million tonnes per annum of LNG, or about 0.77 billion cubic feet per day of natural gas.

NextDecade also said Monday that it took several steps to preserve liquidity, including an 18% decrease in headcount, furloughing 14% of staff, and voluntary reductions in pay for its chief executive and other members of the executive team.

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