April 2, 2019 / 4:18 AM / 3 months ago

NextDecade says it is first to sign U.S. long-term LNG contract linked to Brent

* Signs 20-year binding contract with Shell

* Contract for 2 million tonnes of LNG a year from Rio Grande

* Three quarter volumes indexed to Brent, rest on U.S. gas indices

By Meng Meng and Jessica Jaganathan

SHANGHAI/SINGAPORE, April 2 (Reuters) - U.S. company NextDecade Corp said on Tuesday it has signed the country’s first long-term contract for liquefied natural gas (LNG) produced out of the United States to be indexed to Brent oil prices.

It signed a 20-year binding sales and purchase agreement (SPA) with Royal Dutch Shell for the supply of two million tonnes per annum of LNG from NextDecade’s Rio Grande LNG export project in Brownsville, Texas, with full destination flexibility.

Shell will buy LNG on a free-on-board (FOB) basis starting from commercial operation of the project, which is expected in 2023, NextDecade said in a press release issued at an industry event in Shanghai on Tuesday.

Three-quarters of the LNG will be indexed to Brent crude oil prices, and the remaining volumes will be indexed to domestic U.S. gas price markers, including Henry Hub, the company said.

“Shell was the first to sign a long-term SPA from the United States indexed to Henry Hub in 2011, and so it is fitting they are the first to sign a long-term SPA from a U.S. LNG project indexed to Brent,” said Matt Schatzman, NextDecade’s president and chief executive, in the statement.

“We look forward to finalising additional commercial agreements and to proceeding with the development of our Rio Grande LNG project,” he said.

The agreement will secure more volumes for Shell’s portfolio in the 2020s and ensures that the company can meet growing demand from its global customers, said Slavko Preocanin, vice president of Shell’s LNG marketing and trading division.

NextDecade expects a final investment decision on up to three trains at its Rio Grande project by the end of the third quarter this year.

Rio Grande is planned as a six-train facility at the Port of Brownsville, with a project cost estimated at $17.3 billion and final capacity of 27 million tonnes of LNG a year.

It will be supplied with natural gas from the Permian Basin, Eagle Ford Shale and other resources. (Reporting by Meng Meng in SHANGHAI and Jessica Jaganathan in SINGAPORE; Editing by Tom Hogue)

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