The United Arab Emirates’ main oil company bought a stake in NextDecade Corp.’s (NYSE:NEXT) natural gas export project in Texas, in a first US acquisition that also gives it a 20-year supply deal.
Abu Dhabi National Oil Co. will take an 11.7% stake in phase 1 of the Rio Grande LNG project, according to a statement Monday. The deal will also give Adnoc 1.9 million tons a year of liquefied natural gas supply from the planned Train 4. NextDecade shares gained as much as 16% in New York trading.
Houston-based NextDecade still needs to secure sales contracts to carry out its planned expansion beyond phase 1 and to help it raise financing. The Adnoc deal is “a major step forward” in the probable decision to go ahead with Train 4 and in potential for rising profit from the expansion, according to analysts at Stifel.
The transaction is a significant move into the US for Adnoc and part of an international expansion plan announced in November 2022. The company has been scouring the world for assets to reach new markets. It’s in talks to buy a chemical company in Europe and is also looking to combine one of its units with subsidiary of Austria’s OMV AG to create a $30 billion petrochemical giant. That push coincides with Saudi Aramco’s efforts to boost its global presence, after agreeing to buy an LNG company in Australia.
© Supplied by Adnoc“We’ve made it very clear that we’re interested in key sectors when it comes to low carbon solutions, renewables, natural gas and chemicals,” Musabbeh Al Kaabi, Adnoc’s executive director for international growth, said in an interview. “We’re executing on our strategy and our strategy is clear. It’s a milestone with hopefully more to come.”
Adnoc’s stake in phase 1 of the Rio Grande project will give it access to the first three trains, as production units at LNG facilities are known. Trains 1 to 3 will have a capacity of 17.61 million tons a year, with construction already under way on the first line. Adnoc purchased its stake in the project from Global Infrastructure Partners.
Global Ambition
The UAE, of which Abu Dhabi is the capital, is using its oil wealth to turn Adnoc into a global energy business. The country, and its Middle East neighbors including Saudi Arabia and Qatar, are also investing billions of dollars on gas — seen as an important bridge fuel in the energy transition. The UAE aims to be self-sufficient in the fuel by 2030 as it explores at home and adds stakes in fields from Azerbaijan to Egypt.
France’s TotalEnergies SE and Mubadala Development Co., an Abu Dhabi government-owned investment fund, are both shareholders in NextDecade. Total holds about 17.4% in the Houston-based developer and Mubadala owns about 5.5%, according to data compiled by Bloomberg. The French energy giant also holds a stake in phase 1 of the Rio Grande project, along with NextDecade, GIP and, now, Adnoc.
NextDecade plans to make the final investment decision on building Train 4 in the second half of 2024. It already has a license to proceed and so shouldn’t be delayed by the Biden administration’s decision to put new LNG export project approvals on hold. Adnoc also has an option to take an equity stake in the planned Trains 4 and 5 at the Rio Grande project.
Adnoc, which plans to build its own LNG export facility in the UAE, didn’t disclose financial terms of the US transaction. It didn’t disclose when the project would be begin operations, nor when the company would begin to receive fuel supplies.
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