Aramco Signs Offtake Agreement for Rio Grande LNG

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)-The state-run Saudi Arabian Oil Company signed a definitive agreement to take liquefied natural gas from the fourth train at the Rio Grande export facility, operator NextDecade Corporation (NASDAQ:NEXT) (Houston, Texas) said.

NextDecade said Wednesday it signed a 20-year sale and purchase agreement with a subsidiary of the company, known also as Saudi Aramco. Indexed to Henry Hub, the U.S. benchmark for the price of natural gas, and pending a final investment decision (FID) on Train 4, Saudi Aramco will import 1.2 million metric tons of liquefied natural gas (LNG) per year, or around 160 million cubic feet per day.

"We are extremely pleased to have Aramco as a customer in Rio Grande LNG Train 4," said Matt Schatzman, NextDecade's chairman and chief executive officer. "The Rio Grande LNG facility continues to attract outstanding LNG customers, which we believe is a testament to the quality of our project."

The company added that reaching a positive FID on the fourth train is subject to commercial agreements and financing.

NextDecade plans for an initial five-train facility that would have a peak processing capacity of 3.73 billion cubic feet per day (Bcf/d).

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With construction barely underway, the company already announced plans for three new trains, or liquefaction units, that could add 2.4 Bcf/d to the facility's overall processing capacity.

The plant was on hold after the D.C. Circuit Court of Appeals overturned approval of the facility last year due to a lack of a suitable environmental impact statement (EIS). NextDecade in October filed a petition for a rehearing and said last week that it had prepared a draft EIS to address the decision, clearing a regulatory pathway toward approval.

Bechtel Energy (Reston, Virginia) is leading overall developments for NextDecade's construction efforts. Saudi Aramco and the Abu Dhabi National Oil Company hold minority interests in the Rio Grande facility.

Aramco last year inked a similar supply deal. In June, it signed a separate offtake agreement for supplies from the Port Arthur LNG export facility as well, part of the Saudi company's efforts to advance its position on the global LNG stage. Port Arthur is a $13 billion joint venture between Sempra Energy (NYSE:SRE) (San Diego, California) and ConocoPhillips (NYSE:COP) (Houston, Texas).

The United States became the world leader in LNG exports in 2022, and U.S. President Donald Trump has vowed to capitalize on the advantage during his second, non-consecutive term in office.

Gulf nations, however, were subjected to a 10% tariff on trade with the United States under Trump's sweeping agenda to generate revenue to support tax cuts, while working to reshore many U.S. industries. Nations subject to tariffs may have to diversify their trade options to avoid over-exposure to financial shocks.

Meanwhile, the International Energy Agency has warned that it expects the increase in LNG export capacity to outpace demand, creating a supply overhang that could eat into gas prices and margins.

Low prices for Henry Hub last year caused financial harm to many in the energy sector.

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