EQT to buy LNG from Rio Grande Train 5

US gas producer EQT announced on September 3 that it had agreed to buy LNG from the proposed fifth train at NextDecade’s Rio Grande LNG.

Under the newly announced sale and purchase agreement (SPA), EQT will buy 1.5mn tonnes per year (tpy) from Rio Grande Train 5 over a 20-year period on a free-on-board (FOB) basis. The price of the LNG will be indexed to the Henry Hub gas price. The deal remains subject to NextDecade making a final investment decision (FID) on Train 5, which the company is targeting for the fourth quarter of this year.

The deal confirms a Bloomberg report from August 27, which cited sources familiar with the matter as saying that EQT was in talks with NextDecade over LNG supply from Rio Grande LNG. Also on August 27, EQT struck a separate deal to buy 2mn tpy of LNG from Sempra Infrastructure’s Port Arthur LNG Phase 2 development. (See NorthAmOil Week 34)

Both the recent deals signal a new step in EQT’s strategy. The company, which produces gas in the Appalachia region and has agreements to supply other LNG terminals on the US Gulf Coast, has been talking about expanding into LNG since 2022. The deal with Sempra was EQT’s first binding LNG SPA and the SPA with NextDecade quickly followed.

"The execution of this agreement represents continued momentum of EQT's LNG strategy, which is focused on further diversifying the company's end-market exposure into the rapidly growing global gas markets and accelerating long-term earnings growth,” stated EQT’s president and CEO, Toby Rice. “Consistent with our existing LNG deals, EQT will market and optimise its own cargoes, providing structuring flexibility and downside protection,” he added.

“Our growing LNG exposure, combined with the unique attributes that have made EQT the supplier of choice for end users of natural gas domestically – our low-cost structure, unmatched scale and resource depth, investment grade balance sheet, and peer leading emissions profile – position the company to expand its market reach and become the supplier of choice for end users of natural gas worldwide,” Rice continued.

"EQT has been aggressive in securing long-term supply and marketing deals,” a Siebert Williams Shank analyst, Gabriele Sorbara, was quoted by Reuters as saying. “Recent deals have the potential to improve EQT's realized pricing by linking more volumes to LNG benchmarks and diversifying away from in-basin pricing and allowing for production growth longer-term."

For NextDecade, meanwhile, the deal represents another step towards an FID on Train 5. The company said it had announced a total of 3.5mn tpy of LNG from Train 5 sold under 20-year LNG SPAs to date and was targeting an additional 1.0mn tpy sold in order to support an FID. It has also extended the price validity period under its lump-sum turnkey (LSTK) engineering, procurement, and construction (EPC) contract with Bechtel Energy for Train 5 until November 15. The total costs for Train 5 and related infrastructure are expected to be around $6.7bn and the company is working to take FID prior to the expiry of the extended price validity period.