NextDecade Corporation, a Houston-based energy company, is building a liquefied natural gas facility in Brownsville called Rio Grande LNG. The plant would receive natural gas primarily from West Texas and then liquefy it so the gas could be exported overseas.
The project has been in the works for years, but uncertainty in the natural gas market slowed its progress. There is also a coalition of people from the region – including environmental groups, shrimpers and fishermen, and human rights activists – who oppose the project.
But at the end of last week, the installation take a big step forward when ExxonMobil agreed to buy 1 million tons of liquefied natural gas per year for the next 20 years. Sergio Chapaa Bloomberg reporter, spoke to Texas Standard about what the deal means for the future of the project.
This transcript has been slightly edited for clarity:
Texas Standard: How does this agreement affect the future prospects of this liquefied natural gas facility near Brownsville?
Sergio Chapa: This project has been on the drawing boards for almost a decade — I mean, since 2014 — and it’s a huge export terminal that wants to take advantage of the abundant natural gas. We’re talking about the Eagle Ford Shale, we’re talking about the Permian Basin; funnel it to the coast, then down to Brownsville. And then the idea was to freeze the gas until it becomes liquid – and that’s -270 degrees – and then put it on ships and ship it around the world. We are talking about 27 million tons of LNG, liquefied natural gas, per year, leaving Brownsville.
During the coronavirus pandemic, there was a global surplus of natural gas. There was a drop in demand and a drop in prices. And so few contracts were signed for these projects. Everything changed, you know, in the fall [and] last winter of 2021 when Europe realized it was running out of LNG and that tightened the global market and pushed prices up to the situation we find ourselves in today. And then, you know, Russia’s invasion of Ukraine further exacerbated this problem. And now we see agreements being signed six days apart, one day apart. These transactions have accelerated over the past four months.
You mentioned that it’s been talked about for a while, but the project was dormant and Texas has a lot of LNG. Where has this LNG gone so far, if we have so much to export? Did he burn it? What exactly happened?
Well, a lot of that natural gas is shipped by pipeline across the border to Mexico, where there are power plants, maquiladoras. We’re talking 7 billion cubic feet per day, but another like 12 billion cubic feet per day leaves one of the seven LNG export terminals in the United States. Most of them are on the US Gulf Coast, two are in operation in Texas, one is under construction in Texas. And this Rio Grande LNG could become the fourth.
These types of facilities face many regulatory hurdles before they can be operational. Does NextDecade still have any red tape to go through before it can move forward?
Well, sure, I’m glad you asked that question. I mean, you know, getting the permit is the easy part. It’s right after that you have to get the billions of dollars in funding. You have to get the contracts and then get the financing to build the project. And even then, the project still faces challenges. Federal regulators still want questions, answers regarding emissions impacts and social justice for the communities there in the Rio Grande Valley. It’s along the US-Mexico border region, some of the poorest people in the US, also a Latin American majority area. So there are activists and opponents who insist on this opinion. There is a legal battle over a wetland permit. Activists are pressuring the banks not to finance the project.
And then, you know, because of the pandemic, the project was originally supposed to be commissioned in November 2026. But because of the delays caused by the pandemic, the project is now asking to push that deadline to 2028 to have the whole thing in service . And that’s something that’s being fought and debated right now that hasn’t been approved yet. But that’s another small hurdle they have to overcome.
You mentioned earlier the war in Ukraine; many countries in Europe are really worried about what they are going to face as winter approaches. They fear that Russia is militarizing energy supplies – cutting them off, for short. For example, Germany, one of the largest countries dependent on Russia, does not have LNG infrastructure. It is now a complete about-face that is accelerating to have better and more diverse sources of heating energy. How does this affect the viability of this new facility in Brownsville?
Today, two words entered our vocabulary after the invasion of Ukraine by Russia: energy security. And that’s being able to have enough energy to keep the lights on and people warm through the winter. And that has been a priority for Europe, where natural gas prices have risen dramatically. You know, in Europe, natural gas now sells for $50. Where in the United States, you know, for our various reasons, we’re approaching $10. So that’s several times a lot more than the United States. There is a good profit to be made there by sending LNG to Europe, an arbitrage, if you will. And yes, it is very important for Europe this summer. They spend the summer trying to build up their storage in winter reserves. That way, when winter comes, they will have enough natural gas to run power plants and heat homes.
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