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NextDecade confirms FID delay on Rio Grande LNG
US GULF COAST
US-BASED NextDecade has confirmed that it will delay its final investment decision (FID) on the Rio Grande LNG project, proposed for the Port of Brownsville, Texas, until 2021. The news came around a week after the company had warned of a potential delay, but said that it was still aiming to reach FID on Rio Grande this year. (See NorthAmOil Week 19)
The company cited the coronavirus (COVID- 19) pandemic, noting that it was affecting LNG market conditions. Indeed, NextDecade fol- lows in the footsteps of Sempra Energy, which recently pushed back its FID on the Port Arthur LNG project to 2021. Leading US LNG exporter Cheniere Energy has also signalled that it may delay sanctioning the next phase of expansion at its Corpus Christi terminal.
In its announcement, which came alongside its quarterly earnings, NextDecade outlined steps it would take to manage costs and preserve liquidity in the run-up to making its FID. The company has already cut its headcount by 18% since the end of 2019, and said that it had fur- loughed 14% of its full-time staff in May. This measure is being taken until NextDecade has more clarity on the impact of COVID-19 on the LNG market, it said.
In addition, the company said it would reduce its office space under lease over the next few months, and defer additional information tech- nology (IT) spending until FID is reached. Also, NextDecade’s CEO and certain other members of the executive team have voluntarily reduced their base salaries by 10% for the remainder of 2020.
However, NextDecade continues to work with engineering, procurement and
construction (EPC) contractor Bechtel. The two companies agreed to a “limited scope of ongoing work” that will allow for continued engineering progress on Rio Grande LNG while an FID is being awaited.
NextDecade expects these measures to ensure that it can sustain pre-FID development activities up to the end of 2021. From the sec- ond quarter of 2020, the company anticipates pre-FID development spending to average just over $2mn per month. And despite the meas- ures being taken to preserve liquidity, Next- Decade continued to sound a confident note over the longer-term potential for Rio Grande LNG.
“Our balance sheet is strong, we have no debt outstanding, and the long-term fundamen- tals for our Rio Grande LNG project remain firmly intact,” said NextDecade’s chairman and CEO, Matt Schatzman. “This solid foundation, together with our sustained regulatory, engi- neering and commercial progress, positions the company and our Rio Grande LNG project extremely well for when global market condi- tions improve.”
The Rio Grande project is designed to have a capacity of 27mn tonnes per year (tpy), and would use gas from the Permian Basin and Eagle Ford shale plays as feedstock. This would make it larger than any of the US LNG terminals cur- rently operating, though Cheniere’s Sabine Pass terminal will eventually be expanded to produce 30mn tpy.
NextDecade noted that it had achieved sev- eral regulatory milestones in the first quarter of 2020, and that Rio Grande LNG was now shovel-ready.™
The Rio Grande project is designed to have
a capacity of 27mn tpy, larger than any
US terminals currently operating.
NextDecade outlined steps it would take to manage costs and preserve liquidity in the run-up to making its FID.
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w w w . N E W S B A S E . c o m Week 20 21•May•2020