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Engie Drops US LNG Deal Over Emissions Pressure

Copyright © 2021 Energy Intelligence Group

French utility Engie has dropped talks over a potential LNG supply deal with US company NextDecade following alleged pressure from the French government over environmental concerns. Engie was in talks with NextDecade over a $7 billion, 20-year US LNG supply deal from NextDecade’s 27 million ton per year Rio Grande LNG liquefaction plant in Brownsville, Texas. The deal was reportedly for the supply of 2.9 million tons of LNG to be shipped between 2025 and 2045. “Engie has decided not to pursue commercial discussions with NextDecade on this gas supply project,” an Engie spokesperson tells Energy Intelligence, without elaborating about the causes for the decision. NextDecade said it does not comment on specific details of commercial negotiations due to company policy. The French government was reported to have pressured Engie to reconsider the deal due to questions over the environmental impact of methane emissions from the oil and gas fields feeding NextDecade’s LNG plant (OD Oct.22'20). The gas is planned to come from fields in the Permian Basin and Eagle Ford Shale plays in Texas, where regulators have declined to address widespread gas flaring or methane leaks (OD Nov.2'20). The French state owns 23.6% of the utility. Engie had previously said that its board of directors “required further clarifications” over the project. NextDecade plans to make a final investment decision on Rio Grande next year. The company has a long-term supply deal with Royal Dutch Shell and a deal with the French utility would have given it additional commercial backing to move ahead with the project. The deal's breakdown comes as the US is voting in its presidential election, which will determine whether Washington will continue with its current foreign and energy policy. The incumbent US administration has pursued an aggressive push of US LNG exports, particularly to Europe. Washington has also imposed sanctions to block the construction of Russia’s Nord Stream 2 natural gas pipeline, which the EU condemned as encroaching on European sovereignty. Paris opposes Nord Stream 2 even though Engie is one of the five European companies indirectly financing the project. A group of 21 US Republican members of Congress sent a letter dated Nov. 2 to French President Emmanuel Macron asking his government to “re-examine the facts and reconsider this ill-informed decision.” The letter cited government analysis showing that US LNG exports have a smaller greenhouse emissions footprint than other gas supplies to the EU. They also accuse Russia of using NGOs to “influence the decision-making in Paris and elsewhere ... to block initiatives that reduce energy reliance on Moscow.” “Absent France canceling natural gas contracts with both Russia and Algeria as well, we find using GHG [greenhouse gas] emissions as the justification for blocking US LNG dubious at best,” the letter said. The Trump administration has been largely dismissive of the methane concerns. Last week, Energy Secretary Dan Brouillette downplayed the idea that concerns over the methane rollbacks could impede US exports, at least in the “short run.” But others in Washington have regarded the deal collapse as a harbinger of increasing scrutiny of US energy products, given Trump’s backpedaling from strong climate controls at the federal level. “The world is moving on,” Randolph Bell of the Washington-based Atlantic Council said, citing the Engie announcement. Bell added that the points raised in the senators’ letter on Monday may be true, but “it’s beside the point; this is about climate politics.” The French branch of environmental NGO Friends of the Earth celebrated the news from Engie as “a new explicit recognition” of the environmental and social impact of shale gas. It also called on French investment bank Societe Generale, a financial adviser to the Rio Grande project, to withdraw from it and stop its support for the shale industry. The group expects France to continue having zero tolerance for unconventional oil and gas, including refusing to import or consume it. “It also requires the government to assume its responsibilities as a regulator and force the banks to close the floodgates to these sectors that are aggravating the climate crisis," it said. Jaime Concha, Copenhagen, and Bridget DiCosmo, Washington

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