Europe's Engie Buys More U.S. LNG With Green Credentials

(Bloomberg) -- NextDecade Corp. gained the most in more than two weeks after French utility Engie SA agreed to buy liquefied natural gas from its proposed export terminal in Texas. 

The pact marks a U-turn for the European powerhouse, which less than two years ago scrapped plans to buy LNG from the same project. It comes at a time when Europe is trying to eliminate its reliance on Russian gas, and after NextDecade committed to slash most of the emissions associated with the terminal.

NextDecade shares rose as much 11% in New York Monday. 

Under the deal, Engie will purchase an annual 1.75 million metric tons of the super-chilled fuel produced at the Rio Grande LNG export project for 15 years, NextDecade said Monday in a statement. 

Engie’s 2020 decision to drop a $7 billion deal with NextDecade came amid pressure from an environmental group and was a major pushback for the American gas industry. Suppliers have since stepped up efforts to reassure European consumers of their green credentials including by tracking and slashing emissions of methane, a powerful greenhouse gas.  

Europe’s quandary — whether it can get enough gas amid a global push for energy security — is a multi-billion dollar question for the U.S. gas industry seeking to justify new LNG export terminals and production. In March, the U.S. committed to working with international partners to boost supplies of LNG to European countries to about 1.8 trillion cubic feet (50 billion cubic meters) annually by 2030.

NextDecade aims to reduce carbon emissions from the Rio Grande project by more than 90% via carbon capture and storage while relying on so-called responsibly sourced gas and the use of net-zero power to produce a lower carbon-intensive LNG. While carbon capture and storage is seen as a key emissions reduction technology, it has yet to be proven economically viable on a large scale. 

Engie had also agreed to purchase some LNG from Cheniere Energy Inc., the largest U.S. exporter of natural gas, provided that the company discloses the carbon intensity of every cargo it sells and quantifies emissions starting from the wellhead.

NextDecade said it should make a positive final investment decision on a minimum of two trains of the Rio Grande LNG export project in the second half of 2022, pending the achievement of further LNG contracting and financing. The first train is expected to start commercial operations as early as 2026.

©2022 Bloomberg L.P.