NextDecade is abandoning development of a sixth liquefaction train at its proposed Rio Grande LNG export facility in Texas, saying technology would allow it to achieve the same total capacity with five units if it decides to move forward with the full project.
The July 14 disclosure follows the company's announcement two months ago that, amid challenging market conditions, it was delaying until 2021 a final investment decision on whether to build the up to 27 million mt/year facility in Brownsville. Two other liquefaction projects have also been proposed to be built near the port there on the state's southern tip along the Gulf of Mexico.
The original plan for Rio Grande LNG called for six trains each capable of producing 4.5 million mt/year of LNG. Thanks to engineering optimizations, NextDecade now believes it can achieve an average of 5.4 million mt/year of LNG per train, allowing it to drop a sixth train and reap the same total output.
Such a move could save construction costs and also cut carbon emissions. Cheniere Energy is among existing US LNG exporters that have been able to optimize their trains to be able to liquefy more gas with the units than the volumes that were originally intended.
"In addition to the emissions reductions we will achieve, these optimizations will reduce the project's footprint, traffic, and construction schedule, and demonstrate our ongoing commitments to the community in the Rio Grande Valley," NextDecade CEO Matt Schatzman said in a statement.
It's still not certain, however, whether NextDecade will build even five trains, if it moves forward with the project at all.
North American developers of liquefaction capacity were struggling before the coronavirus pandemic to secure sufficient commercial support to finance construction of their multi-billion dollar facilities. Those challenges have gotten more difficult since then as international LNG prices have plunged and demand has weakened.
Multiple developers of new terminals have delayed FID or stopped providing a target for making a decision.
When it announced the FID delay for Rio Grande LNG, NextDecade also said that it had reduced its workforce by 18% since the beginning of the year and furloughed an additional 14% of staff in May to help give it the financial flexibility to operate through the market downturn.
To date, Shell's 20-year agreement to buy 2 million mt/year of supply from Rio Grande LNG is the only firm offtake deal tied to the terminal that NextDecade has announced. NextDecade needs to sell another 9 million mt/year of supply under long-term contracts to achieve FID on two or three trains, the developer has said.
Exelon-backed Annova LNG's 6.5 million mt/year project and Texas LNG, expected to include 2 million mt/year of capacity in its first phase, are the other two terminals proposed to be built in Brownsville. Neither one has reached FID.
Based on its reduced footprint plans, NextDecade said it would soon "vacate" Train 6. The company has already received Federal Energy Regulatory Commission certificate authorization to build Rio Grande LNG. If it were to develop a sixth train in the future, it will be required to secure permission from FERC and other US agencies, the developer said.
