The French government has asked Engie SA not to sign a $7 billion deal for U.S. liquefied natural gas (LNG) with NextDecade Corp. over concerns that its U.S. shale natural gas is too dirty, Kallanish Energy has learned.
The request came last month from the French economy ministry, and Engie said it is studying the proposed 20-year contract for LNG from the Rio Grande LNG liquefaction/export facility in South Texas. It has taken no action on the contract.
NextDecade, Engie and French Ministry of the Economy, Finance and Recovery declined comment. U.S. officials could not be reached for comment.
The development was first reported in a French publication, La Lettre A. It was confirmed by Politico in the United States. Both publications relied on unnamed sources.
Moves by the Trump administration to rollback environmental rules on methane and the failure of U.S. O&G producers to reduce emissions are making it more difficult for U.S. producers to market their LNG as a clean alternative in overseas markets concerned by climate change, observers said.
The French government, a part owner in Engie, reportedly said it was troubled by methane emissions from the U.S. shale fields in West Texas that would supply the NextDecade plant in Brownsville, Texas, Politico reported.
France reportedly told Engie to delay or cancel the contract because of the climate impacts in Texas, it said.
The French intervention comes as the European Union has kicked off a new campaign to combat climate change, citing energy imports as a major source of methane emissions.
Such pollution is likely to become a major problem for U.S. LNG producers as more countries try to improve their environmental records, partly by cutting imports of energy deemed too dirty, Kevin Book, director of analysis firm ClearView Energy, told Politico.
Earlier this month, NextDecade had announced that it is targeting carbon neutrality at its planned Rio Grande LNG facility.
The Texas-based company said it has developed proprietary processes using proven technology to reduce the carbon dioxide equivalent emissions by 90% from the plant.
The most feasible technical solution is carbon capture and storage, although the company did not detail its plans.
Chairman and CEO Matt Schatzman said his company expects to make a final investment decision on Rio Grande LNG in 2021.
The $9.56 billion plant will have five trains or units and it will produce up to 27 million metric tonnes of LNG per year.
The initial plan called for six trains and 27 million tonnes. That was later revised to five trains but the LNG production would remain the same.
Enbridge is working on the Rio Bravo natural gas pipeline to serve the LNG facility. It would move up to 4.5 billion cubic feet of natural gas per day from the Eagle Ford Shale in South Texas and the Permian Basin in West Texas and New Mexico to Brownsville.
Rio Grande LNG is one of three LNG projects planned in the Brownsville area.