French energy company Engie SA has indefinitely postponed signing a long-term deal to buy liquefied natural gas (LNG) from the proposed Rio Grande LNG facility in Texas because of French government concerns over hydraulic fracturing (fracking), a person close to the matter told NGI on Friday.
“What is very clear is that Engie postponed discussions because of government pressure,” said Lorette Philippot, private finance campaign manager of French environmental group Les Amis de la Terre (Friends of the Earth).
Bloomberg reported Thursday that Engie’s board decided to further investigate the environmental implications of the potential $7 billion, 20-year contract before deciding whether to back it. The proposed deal is slated to run until 2045, meaning that exports would begin in 2026.
The government owns a 23.63% share in Engie, which says on its web site that its “purpose (‘raison d’etre’) is to act to accelerate the transition towards a carbon-neutral world, through reduced energy consumption and more environmentally-friendly solutions, reconciling economic performance with a positive impact on people and the planet.”
Philippot said her group had urged the government to reject the planned deal with Rio Grande LNG because emissions related to fracking would not be compatible with Engie’s stated goals of reducing direct emissions by 85% and using renewable gas to substitute for imported natural gas. Those steps are designed to help meet the Paris Agreement goal of limiting the rise in global temperatures by 2050 to 2 degrees Celsius more than pre-industrial levels. She said she was recently told by Engie officials that the government delayed finalizing the deal to review the matter and it is unclear when, or if, the deal would be signed.
She said Engie’s move was more related to concerns over fracking than a blueprint issued earlier this month by the European Commission (EC) to significantly reduce methane emissions in the 27-member-state European Union.
Experts told NGI the EC proposal would not likely have an immediate impact on the U.S. LNG export market as for now it does not set specific limits on emissions from foreign producers. But the proposal calls for cooperation from foreign producers and potential measures to address non-cooperation, a possible concern for the U.S. LNG industry if President Trump is reelected and continues his push to roll back methane emissions measures implemented by the Obama Administration.
U.S. Department of Energy spokeswoman Jessica Szymanski told NGI Monday that the “United States continues to lead the world with the largest drop in energy-related carbon emissions reductions, including every signatory of the Paris accord. We have achieved this by advancing and deploying technologies that make all of our energy resources cleaner, not by eliminating our abundant natural resources and the economic benefit they provide.
“As the International Energy Agency has stated, U.S. natural gas exports have contributed significantly to lowering emissions both in Europe and around the world,” Szymanski added. “It is short-sighted and narrow-minded to delay LNG projects for political posturing and hinder the environmental progress we’ve made using American natural gas, especially if countries like France hope to meet their own climate goals. The U.S. will continue our efforts to provide cleaner-burning, reliable LNG to our allies around the world.”
Management at Houston-based NextDecade Corp., the owner of the Rio Grande LNG project, declined to comment on the matter, only saying that the company “is engaged with a significant number of prospective customers that reflect the global nature of the LNG business.”
NextDecade management announced earlier this month that Rio Grande LNG would use carbon capture and storage technology in conjunction with its proprietary processes to reduce expected carbon dioxide equivalent emissions by about 90%. Philippot said those measures would only address on-site emissions and not those from the Permian basin.
It is unclear how important the potential Engie deal would be for NextDecade to fund construction of the multibillion-dollar Rio Grande LNG facility. Management has said the company plans to make a positive final investment decision next year on the project, which at full build-out would have a combined capacity of 27 million metric tons/year (mmty), equivalent to about 3.6 Bcf/d of gas, from five liquefaction trains.
Management has said the project could come online with initial capacity of 10.8 mmty from two trains. An LNG export project typically needs to sell at least 60-70% of its capacity under long-term deals to get bank financing. So far NextDecade has only signed a 2 mmty long-term supply deal with Royal Dutch Shell plc for Rio Grande supplies.
Engie in 2018 sold its 16.6% interest in the Sempra Energy-led Cameron LNG project in Louisiana, as well as its long-term offtake rights of 4 mmty, to French major Total SE.
Total, the world’s second-largest privately held LNG player, did not respond to a request for comment on its U.S. LNG plans. Total also has U.S. LNG equity production and long-term supply stakes in the Cove Point, Freeport and Sabine Pass terminals in operation from Maryland to the Gulf Coast. The company also holds stakes in the proposed Driftwood LNG terminal and the Energia Costa Azul project in Mexico.
Other French companies also have U.S. LNG capacity and since 2017 France has imported 63 U.S. cargoes totaling a gas equivalent of more than 200 Bcf, ranking it the ninth-largest importer of U.S. LNG, said the Center for LNG’s (CLNG’s) Executive Director Charlie Riedl.
“The natural gas industry operating in the United States places a great value on minimizing any risk to the environment and are constantly developing safer, cleaner, and better methods of production,” Riedl said. “Regulatory uncertainty means that CLNG members and the rest of the natural gas value chain are voluntarily finding innovative ways to make U.S. natural gas cleaner. We do not want the perception of regulatory rollbacks to cause our trade partners to question our production methodology.”
Engie subsidiary Engie Marketing North America in the second quarter ranked as the 24th-largest gas marketer in North America, according to NGI’s Top North American Natural Gas Marketers rankings.
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