Readers know that I am a big fan of LNG and have been actively looking for LNG-related companies. I recently profiled Woodside Energy (WDS), one of the largest LNG producers in the world. In this article, I will shift my focus to a US-based LNG developer that has plenty of potential but not as advanced or well-known as Cheniere Energy, Inc. (LNG) or Tellurian Inc. (TELL). The company I want to explore is NextDecade Corporation (NASDAQ:NEXT).
NextDecade has an interesting LNG project that has good geography and scale. It also comes with plans for an integrated carbon capture and storage solution, differentiating NextDecade’s LNG cargoes from that of other export terminals. However, there simply isn’t enough public information regarding the economics of the SPAs and project financing for proper analysis and valuation. Until that information becomes available, investors are urged to stay on the sidelines on NEXT.
NextDecade is a company focused on developing the Rio Grande LNG (“RGLNG”) Export Terminal, as well as a Carbon Capture and Storage (“CCS”) project at the terminal to minimize the carbon footprint of the project.
The RGLNG project is a fully permitted LNG export terminal, envisioned to ultimately have the capacity to export 27 mtpa of LNG through 5 liquefaction trains (Figure 1). The project is located at the Port of Brownsville, Texas, with deepwater port access and supporting marine infrastructure. It is designed to use proven liquefaction technology from Air Products and Chemicals (APD) and Baker Hughes (BKR). RGLNG will be supplied with natural gas from the Permian and Eagle Ford shale basins via the Rio Bravo Pipeline, a 4.5 Bcf/d pipeline to be built by Enbridge Inc. (ENB).
RGLNG has EPC agreements in place with Bechtel, one of the largest construction companies in the U.S. The agreements are structured as two Lump-sum turnkey (“LSTK”) EPC contracts, one for 2 trains and up to 11.7 mtpa capacity, and another for 3 trains and up to 17.6 mtpa. The lump-sum nature of the contracts protects NextDecade from potential cost overruns while the separation of the project allows for development in stages (Figure 2).
As mentioned above, RGLNG will connect LNG customers with the resource-rich Permian and Eagle Ford basins, which have a combined 700 Tcf of natural gas resource. At the same time, NextDecade believes RGLNG’s location in South Texas is a competitive differentiator as it avoids potential gas supply and concentration risk with other Upper Texas/Louisiana LNG operators. Furthermore, Brownsville is less susceptible to …….