Mubadala to invest $50m in Rio Grande LNG project

The Abu Dhabi company reached an agreement with US company NextDecade, which is developing the Texas facility

Wood Mackenzie says US terminals could be underutilised for several summer months as margins for several energy companies remain negative. Bloomberg

Mubadala reached an agreement with NextDecade Corporation to invest $50 million (Dh183.7m) in the US company's upcoming Rio Grande liquefied natural gas facility, as part of the Abu Dhabi entity's plans to capture gains from the shale boom.

Mubadala will purchase the equivalent amount in common stock via a private placement at a price of $6.27 per share, the company said in a statement.

The 27 million tonne per annum Rio Grande LNG project is one of the largest gas schemes under way in the US, which has experienced a boom in production along its shale basins due to greater efficiencies in drilling. The Rio Grande project in Texas will source gas from the Permian Basin before liquefying it for the global export markets.

The scheme was "optimally positioned to provide a highly competitive export route for the abundant gas resources of the Permian Basin and a compelling commercial proposition for LNG customers, Permian producers and NextDecade shareholders alike", Mubadala midstream executive director Khalifa Al Romaithi said.

"Our investment also reflects Mubadala’s positive outlook on the global gas market and the growing role of gas in the energy transition," he added.

Mubadala will have one seat on NextDecade's board of directors and will have the right to contribute a certain amount of project-level capital injection in Rio Grande's final investment decision.

NextDecade plans to reach financial close on the project by the first quarter of 2020, with commercial operations expected to begin in 2023.

US contractor Bechtel was awarded two contracts worth $9.56 billion earlier this year to execute the engineering, procurement, and construction of the project.

Rio Grande is the latest foray into the US gas sector for Mubadala, which has looked to position itself as a strong player in the North American natural gas market, as well as the petrochemicals industry.

Last year, Mubadala subsidiaries Nova Chemicals and Borealis signed a definitive agreement with France’s Total to develop a $1.7bn petchems facility in Texas.