Key factors for success in global LNG projects, analysed by NextDecade

Matt Schatzman, Chairman and CEO, NextDecade talks about how to ensure on-budget and on-time delivery

With all the LNG projects under development in the world, what are the differentiating factors that make a project successful?

We believe that successful LNG projects – both in the U.S. and around the world – are those that can provide customers:

• Flexibility they seek in today’s market;

• Certainty they need to have confidence in their LNG supplier; and

• Proximity to reliable, low-cost, long-term gas supply.

How does NextDecade’s Rio Grande LNG project provide its customers flexibility and certainty?

Our ability to offer multiple pricing options maximises our total addressable market and we believe will ensure success for our Rio Grande LNG project, making NextDecade a leader among the next wave of U.S. LNG suppliers.

U.S. and non-U.S. projects have historically offered LNG indexed only to Henry Hub and only to oil, respectively. We were the first U.S. LNG supplier to offer long-term LNG supply indexed to Brent. We also offer long-term LNG supply indexed to Henry Hub, Agua Dulce, and Waha, and we are exploring other indexes as well.

Earlier this year, we executed a 20-year supply and purchase agreement (SPA) with Shell – a recognised pioneer in the global LNG business, and the largest portfolio LNG company in the world – for 2 mtpa of LNG from our Rio Grande LNG project. This SPA is the first-ever long-term contract for U.S. LNG with volumes indexed to Brent. The free-on-board contract has full destination flexibility.

Certainty is a particularly key characteristic of any successful LNG project.

We are deploying proven technology utilised in the majority of liquefaction facilities around the world. These include Air Products C3MR liquefaction, BakerHughes GE rotating equipment, and ABB automation solutions; all these technologies will significantly reduce construction and operational risk.

In May 2019, we executed a fully wrapped lump-sum turnkey EPC contract with Bechtel for the first three trains of Rio Grande LNG. Bechtel is a leading global LNG EPC contractor, having constructed about 30 percent of the world’s liquefaction capacity. Bechtel has successfully delivered seven liquefaction trains on the U.S. Gulf Coast and has two more under construction.

With just the first three trains of our project, Rio Grande LNG is expected to be the lowest cost per ton greenfield LNG project built on the U.S. Gulf Coast under a fully wrapped lump-sum turnkey EPC contract. Our global LNG customers, feed gas suppliers, and other stakeholders can have the utmost confidence in the on-time and on-budget delivery of our Rio Grande LNG project.

What differentiates Rio Grande LNG’s location versus other U.S. LNG projects?

NextDecade’s Rio Grande LNG project is the largest solution linking Permian Basin associated gas to the global LNG market. The Permian Basin represents the deepest inventory of economic natural gas resource in the world and, together with the Eagle Ford Shale, holds nearly 700 Tcf of natural gas.

Our Rio Bravo Pipeline, which will supply our Rio Grande LNG facility, originates in the Agua Dulce area, a major market that has attracted significant associated gas volumes from the Permian Basin and the Eagle Ford Shale.

In addition to its proximity to abundant, low-cost natural gas supply, our Rio Grande LNG project is located on a site in the Port of Brownsville, an uncongested deepwater ship channel. The site has a number of other favorable characteristics that make it great for construction, including optimal soil conditions and access to a large and highly skilled labor force in the Rio Grande Valley.

Why are there so many U.S. LNG projects competing for a piece of the second wave?

As an industry, differentiation is what we do to compete, but there’s a broader cause at play here and it’s much bigger than any one project. It’s where we as an industry converge.  It’s the real evidence that demonstrates LNG projects help the environment, enable economic security for future generations and improve quality of life by providing access to low-cost clean energy to communities around the world.