France's Engie Pulls Out of US LNG Deal Talks

Copyright © 2021 Energy Intelligence Group

In another ominous sign for the second wave of US LNG exporters, French utility Engie has dropped talks over a potential LNG supply deal with 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 proposed 27 million ton per year (3.6 billion cubic foot per day) Rio Grande LNG liquefaction plant in Brownsville, Texas. The deal was reportedly for the supply of 2.9 million tons/yr 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 told Energy Intelligence, without elaborating about the reasons for the decision. NextDecade said it does not comment on specific details of commercial negotiations due to company policy. Engie's decision could be the tip of the iceberg in terms of Europe's actions against LNG imports from the US and elsewhere. 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. The gas is planned to come from fields in the Permian Basin and Eagle Ford Shale plays in Texas. The French government owns 23.6% of the utility, which 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 Engie would have given it additional commercial backing to move ahead with the project. Engie's move is a “pretty strong indicator” of the direction Europe is headed with the environmental scrutiny of gas, according to Charlie Riedl, executive director of the Washington-based Center for LNG. “Those companies that are able to respond and have a plan in place will likely continue to be able to advance their goals commercially” (NGW Oct.26'20). 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 deal's breakdown comes after Washington also imposed sanctions to block the construction of Russia’s Nord Stream 2 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. 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

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