ADNOC Acquires Stake in NextDecade’s Rio Grande LNG Project

Reuters, May 20, 2024

Abu Dhabi National Oil Company (ADNOC) has acquired an 11.7% stake in NextDecade's (NEXT.O) Rio Grande liquefied natural gas export facility in Texas and entered a supply agreement, marking the UAE energy giant's first large investment in the United States.

ADNOC said on Monday it had acquired the stake in phase 1 of the project, which includes the first three liquefaction trains, and agreed to a 20-year supply agreement for the fourth train, which is subject to a final investment decision (FID).

ADNOC has big ambitions in gas and LNG, which along with renewable energy and petrochemicals, it sees as pillars for its future growth. It plans to grow its 6 million metric tons per annum (mtpa) LNG capacity to 15 mtpa by 2028.

With demand for the chilled fuel expected to grow 50% by 2030, ADNOC - and Saudi peer Aramco (2223.SE) - are tapping opportunities in the United States, which has become the world's biggest exporter of LNG as it sends record volumes to Europe.

Reuters reported in March that ADNOC was in talks with NextDecade while Aramco was in discussions to invest in Sempra Infrastructure's Port Arthur LNG project in Texas.

Musabbeh Al Kaabi, ADNOC's executive director for low carbon solutions and international growth, said the deal "marks a significant milestone in ADNOC’s international growth strategy and provides us access to one of the world’s top LNG export markets".

The United States became the world's biggest LNG supplier in 2023, ahead of Australia and Qatar, as supply disruptions and sanctions linked to Russia's war in Ukraine created more demand for exports and boosted prices.

NextDecade is planning to start construction of the fourth liquefaction train in the second half of 2024 after the FID.

Its Rio Grande LNG export plant has been in development for several years, suffering repeated delays, and its phase 1 is now expected to reach completion by early 2029 at an expected cost of about $18 billion.

The total proposed project includes five 5.4-mtpa liquefaction trains capable of turning about 3.6 billion cubic feet per day of natural gas.

ADNOC's offtake agreement from the fourth train is for 1.9 mtpa "on a free on board (FOB) basis at a price indexed to Henry Hub", subject to the FID, ADNOC said.

ADNOC bought the stake in the first phase through an investment vehicle of Global Infrastructure Partners, buying a portion of GIP's existing stake. It "also secures the option from GIP for equity participation in the future Trains 4 and 5 of the project", ADNOC added.

(Reporting by Yousef Saba, Mrinalika Roy, and Tanay Dhumal; Editing by Shinjini Ganguli and Emelia Sithole-Matarise)

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