NextDecade Signs 20-Year Deal with Aramco to Supply LNG From Rio Grande Facility

 NextDecade Partners with Saudi Aramco for 20-Year LNG Supply Agreement

NextDecade, a prominent U.S. liquefied natural gas (LNG) producer, announced on Tuesday that it has signed a landmark agreement with a subsidiary of Saudi Aramco, the world’s largest oil producer, to supply LNG from its Rio Grande facility. The deal spans 20 years and represents a significant step for both companies in the growing global LNG market.

The Growing LNG Landscape

The United States is already the leading exporter of LNG, and production capacity is set to expand further in the coming years. With global demand for cleaner energy alternatives rising, LNG has emerged as a crucial energy source. As part of this trend, Saudi Aramco is positioning itself to become a significant player in the LNG market. The two companies had been in discussions about a potential supply agreement for some time, culminating in a non-binding memorandum of understanding (MoU) signed in June 2024.

The Rio Grande LNG Project

Under the new agreement, the Aramco subsidiary will purchase 1.2 million tonnes per year (mtpa) of LNG from the Rio Grande facility's fourth liquefaction train. However, the deal is contingent on NextDecade's positive final investment decision (FID) for the project. While the Rio Grande LNG export plant has experienced repeated delays, construction is set to begin, with the first train expected to be completed by 2027 at an estimated cost of $18 billion.

In 2023, NextDecade made its FID for the first three liquefaction trains at Rio Grande. LNG developers typically make an FID when they have secured enough supply agreements to finance the construction of the plant. This agreement with Aramco is a crucial step in that direction.

Aramco’s Strategic LNG Expansion

Saudi Aramco’s interest in LNG has been growing, with the company actively seeking to diversify its energy portfolio. The agreement with NextDecade comes after Aramco signed a Heads of Agreement (HoA) in June 2024 with Sempra Infrastructure for 5 million tonnes per year of LNG from the Port Arthur LNG Phase 2 expansion project. As part of the HoA, Aramco could also take a 25% stake in the Phase 2 project if it receives the necessary financial backing.

Aramco's strategic investments in U.S. LNG projects, including both equity positions and long-term supply agreements, highlight its ambition to secure a stable presence in the global LNG market.

Conclusion

With the increasing demand for LNG worldwide, the partnership between NextDecade and Saudi Aramco marks a pivotal moment for both companies. As the United States strengthens its position as the largest LNG exporter, this deal not only provides a steady supply of LNG to global markets but also positions Aramco as a key player in the LNG sector. The Rio Grande LNG project’s successful development will play a crucial role in meeting the growing demand for cleaner energy alternatives, benefiting both the companies and the global community.