Abu Dhabi National Oil Company (ADNOC) has made a significant move into the United States energy market by acquiring an 11.7% stake in NextDecade’s Rio Grande liquefied natural gas (LNG) export facility in Texas. The deal, announced on Monday, includes a strategic supply agreement, marking ADNOC’s first major investment in the US.
The acquisition by ADNOC encompasses phase 1 of the project, which encompasses the initial three liquefaction trains. Additionally, ADNOC has entered into a 20-year supply agreement for the fourth train, contingent upon a final investment decision (FID).
ADNOC’s expansion into LNG aligns with its broader vision for growth, emphasizing gas, along with renewable energy and petrochemicals, as key pillars for future development. The company aims to ramp up its LNG capacity from 6 million metric tons per annum (mtpa) to 15 mtpa by 2028, reflecting its ambitious growth strategy in the sector.
With global demand for LNG projected to surge by 50% by 2030, ADNOC and Saudi Aramco are strategically targeting opportunities in the United States, which has emerged as the leading LNG exporter globally, particularly to Europe.
Strategic Expansion
The move underscores ADNOC’s commitment to diversifying its portfolio and tapping into high-growth markets. Musabbeh Al Kaabi, ADNOC’s executive director for low carbon solutions and international growth, described the deal as a “significant milestone” in the company’s international expansion strategy, granting access to one of the world’s premier LNG export markets.
The United States has experienced a rapid ascent as the top LNG supplier, surpassing traditional leaders like Australia and Qatar in 2023. Supply disruptions and geopolitical tensions, notably related to Russia’s actions in Ukraine, have fueled this shift, driving up demand for LNG exports and bolstering prices.
NextDecade’s Rio Grande LNG project has been in development for several years, facing various delays. However, with the FID anticipated soon, the company expects to commence construction of the fourth liquefaction train in the second half of 2024. They project completing phase 1 by early 2029, with an estimated cost of approximately $18 billion.
ADNOC’s strategic investment in NextDecade’s Rio Grande LNG project reflects its forward-looking approach to securing its position in the global energy landscape and capitalizing on emerging opportunities for growth and diversification.
