Page 7 - NorthAmOil Week 46 2021

NorthAmOil COMMENTARY NorthAmOil

Engie previously
abandoned talks over
a different US LNG
supply deal, reportedly
on French opposition to
the use of shale gas as
feedstock for the fuel.

shale formations, is banned in France, and the perhaps not surprising that the French company
move was seen as a signal that the country also would want to avoid being too vocal about the
opposed its use elsewhere. agreement.
Interestingly, the collapse of talks between
Engie and NextDecade had come despite the What next?
US company touting the steps it was planning to Engie’s deal could be good news for other US
take to reduce greenhouse gas (GHG) emissions producers of LNG, who also risked coming
dramatically at its proposed Rio Grande LNG under fire from opponents of shale gas devel-
terminal. Last year, NextDecade announced opment. It may not help NextDecade with the
it had redesigned the project to cut its carbon development of Rio Grande LNG, however, or
dioxide (CO2) equivalent emissions by 90% and at least not in the short term. The company now
that it was working to address the final 10% of faces having the project tied up in additional
emissions. regulatory processes after a court ordered in
Further details of NextDecade’s plans have August that the US Federal Energy Regulatory No reason has
since emerged, and earlier in 2021 it began to Commission (FERC) review its approval of the
advance plans for a carbon capture and storage project and another one that is proposed for the been disclosed
(CCS) project that would be used to capture same region. for the fact that
the majority of emissions from Rio Grande The federal court said the regulator had not
LNG. However, by this stage, Engie had already adequately explained its approach in evaluating the deal was not
walked away from talks over a potential supply the potential impacts of the projects on climate
deal, despite NextDecade’s efforts to present change and environmental justice communities. announced at
Rio Grande as a more environmentally friendly The court order does not spell the end of the
LNG option than other Gulf Coast export road for the projects, though, and it is possible the time it was
plants. that NextDecade will benefit from the work it struck.
Now, though, it appears that Engie’s priorities has done to reduce emissions from Rio Grande
have changed. The deal came before concerns LNG when FERC revisits its approval for the
emerged in Europe over a looming gas supply project.
crisis, but demand and prices had already risen However, the court order still means a delay
last winter amid supply shortages, serving as a to NextDecade’s efforts to advance Rio Grande,
warning to buyers as they planned ahead for this and in the meantime, buyers could turn to pro-
winter and beyond. jects with less regulatory uncertainty. Indeed,
No reason has been disclosed for the fact that Cheniere – as the largest US producer and
the deal was not announced at the time it was exporter of LNG – appears particularly well-po-
struck, in contrast with Cheniere’s other agree- sitioned to attract buyers, as the Engie deal and
ments. However, from Engie’s perspective, it is other offtake agreements illustrate.™

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