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UAE: Adnoc makes first strategic investment in the US

UAE energy major buys equity stake in Texas LNG field

Adnoc announced on Monday its first strategic investment in the US, with the acquisition of a 11.7 per cent stake in Phase 1 (Trains 1-3) of NextDecade Corporation’s Rio Grande LNG, a leading liquefied natural gas (LNG) export project located in Texas.

The deal is expected to produce a less carbon-intensive LNG. Additionally, Adnoc and NextDecade announced that they have entered into a 20-year LNG offtake agreement from RGLNG Train 4.

The Phase 1 RGLNG equity stake has been acquired through an investment vehicle of Global Infrastructure Partners (GIP), one of the world’s premier infrastructure investors. Adnoc acquired a portion of GIP’s existing equity interest in Phase 1 while NextDecade retains its previously announced expected economic interest in Phase 1 as well as its interests in the Train 4 and Train 5 expansion capacity.

The acquisition is part of Adnoc’s international growth strategy and complements its efforts to expand its lower-carbon LNG portfolio to meet growing gas demand. The 20-year LNG offtake agreement is for 1.9 million tonnes per annum (mtpa) from RGLNG Train 4, on a free on board (FOB) basis at a price indexed to Henry Hub, subject to a final investment decision.

Musabbeh Al Kaabi, Adnoc executive director for low carbon solutions and international growth, said: “We are delighted to partner with NextDecade on this world-class lower-carbon LNG project as it marks a significant milestone in Adnoc’s international growth strategy and provides us access to one of the world’s top LNG export markets. As global energy demand continues to increase, Adnoc is growing our diversified energy portfolio to ensure a secure, reliable and responsible supply of energy to our customers while driving innovation and greater value.”

Rio Grande LNG, situated on a 984-acre site near Brownsville, Texas, is the first US LNG project offering expected emissions reduction of more than 90 per cent through its innovative proposed carbon capture and storage (CCS) project, which is expected to capture and permanently store more than 5 million metric tons per annum of carbon dioxide (CO2) – equivalent to removing 1 million vehicles from the road annually.

Matt Schatzman, NextDecade’s chairman and chief executive officer, said: “We are excited to begin a multi-decade partnership with Adnoc, a major player in the global LNG market, and we look forward to having them as both a commercial offtaker and an equity partner in Rio Grande LNG. LNG from our facility will allow Adnoc to further increase its presence in the global LNG market, while also supplying global customers with more affordable and less carbon-intensive LNG.”

Adnoc’s acquisition of an equity stake in Phase 1 (Trains 1-3) of Rio Grande LNG also secures the option from GIP for equity participation in the future Trains 4 and 5 of the project.

NextDecade is currently targeting FID on Train 4 at the Rio Grande LNG Facility in the second half of 2024, subject to, among other things, finalizing and entering into an Engineering, Procurement and Construction (EPC) contract, entering into appropriate commercial arrangements, and obtaining adequate financing to construct Train 4 and related infrastructure.