U.S. liquefied natural gas (LNG) player NextDecade Corp. is one step closer to sanctioning a carbon capture and sequestration (CCS) project associated with its planned LNG facility in South Texas after signing an initial agreement with Houston-based independent Occidental Petroleum Corp. (Oxy).

Houston-based NextDecade said Thursday it had inked a term sheet with Oxy Low Carbon Ventures (OLCV) to offtake and permanently store carbon dioxide (CO2) captured from the proposed Rio Grande LNG project in the Port of Brownsville in far South Texas.

The deal calls for the companies to negotiate a CO2 offtake agreement and a sequestration and monitoring agreement for OLCV to transport CO2 from the facility. The emissions then would be sequestered in an underground geologic formation in the Rio Grande Valley, “where there is vast CO2 storage capacity,” NextDecade said.

The exact location was not disclosed.

“The CO2 sequestration facility proposed for South Texas is a great example of the many sequestration hubs that OLCV plans to develop across the United States, and eventually around the globe,” said Oxy’s Richard Jackson, president of U.S. Onshore Resources and Carbon Management.

The news follows NextDecade’s recent formation of a NEXT Carbon Solutions subsidiary to develop the LNG CCS project. The company aims to make the facility a net-zero carbon emissions development with CCS and by purchasing carbon offsets.

NextDecade is aiming to make gas exports more amenable to foreign buyers concerned about their environmental footprints. The company announced its net-zero redesign last year, which followed reports that an offtake deal with utility Engie SA was blocked by the French government over concerns about gas flaring in the Permian Basin and Eagle Ford Shale. NextDecade plans to source its feed gas for Rio Grande from Texas supplies.

“A lower carbon offering more closely aligns NextDecade with demands for a cleaner product from international offtakers,” analysts at Tudor, Pickering, Holt & Co. said.

NextDecade aims to make a final investment decision on Rio Grande this year and sanction the CCS project soon after. The facility design envisages five trains capable of producing 27 million metric tons/year (mmty).
Oxy has shifted its strategy in recent years toward more carbon management over oil and gas development. The company is pursuing a massive direct air capture project in the Permian that could capture up to 1 mmty of CO2. Construction is expected to begin in 2022.