France terminates Engie’s US LNG agreement in a commercial and environmental context


PARIS / NEW YORK (Reuters) – French government has asked power group Engie ENGIE.PA delay signing a multi-billion US dollar liquefied natural gas import contract over concerns about the deal’s environmental implications, a source familiar with the matter said.

FILE PHOTO: The logo of the French gas and electricity group Engie is seen in Bouguenais near Nantes, France, October 5, 2020. REUTERS / Stephane Mahe

The intervention comes amid increasing scrutiny of the effects of shale gas extraction methods such as hydraulic fracturing and their impact on climate change through methane emissions, particularly among American producers.

However, it also comes against the backdrop of broader trade disputes between Europe and the United States, with Paris and Washington engaging in retaliatory measures against plans to tax large digital companies, for example.

Engie’s contract would be with NextDecade Corp NEXT.O, which must decide to go ahead with plans to build its Rio Grande LNG export plant project in Texas, as it makes deals with potential customers.

The project “was not aligned with the environmental project and the environmental vision of France,” the source said, adding that the request came from the Ministry of the Economy.

A spokeswoman for Engie, which is partly owned by the French state, said the company’s board of directors decided on September 30 to give itself more time to study the NextDecade contract, saying that “the project required a more detailed examination ”.

But she declined to say whether this followed a state request, while the French government had no immediate comment.

Politico and the French newsletter La Lettre A earlier reported that the state had intervened on the 20-year deal, which they said was worth $ 7 billion.

NextDecade said it could not discuss details of its business transactions, and added that the company was working on measures to target carbon neutrality in Rio Grande.

The company grapples with concerns about the polluting effect of natural gas supplied to LNG processors by producers in Texas and elsewhere, and recently announced that it has developed processes to reduce emissions equivalent to Rio Grande carbon dioxide.

NextDecade has postponed its final decision to invest in Rio Grande from this year to 2021, after government lockdowns to stop the spread of the coronavirus reduced global demand for gas.


French and American environmental activists hailed the delay in Engie’s contract, although Lorette Philippot, from the French activist group Amis de la Terre (Amis de la Terre), said she hoped it would lead to this. that the deal never materializes.

“France must have zero tolerance for shale gas,” Philippot said.

The French government said earlier in October that it would stop providing state export guarantees to projects involving dirty forms of oil such as next year’s shale, followed by all types of oil. from 2025 and gas from 2035.

Rebekah Hinojosa of the Sierra Club, a US-based environmental group, said NextDecade’s setback should add to the reasons for not building the facility.

But analysts at Height Capital Markets in Washington said the French state’s intervention may have been motivated by broader business concerns. These trade tensions could ease, however, if U.S. Democratic presidential candidate Joe Biden wins against Donald Trump in the November 3 election, in which case France could potentially approve the deal at a later date, they said.

“A Biden administration would likely work to reduce trade tensions,” analysts said, adding that Biden was also committed to tightening methane regulations.

The European Union is the world’s largest gas import market and the United States is vying for market share with cheaper pipeline gas from Russia, which has also led to tensions.

Engie, alongside other European energy companies, is one of the backers of the Nord Stream pipeline project led by the Russian oil giant Gazprom. GAZP.MM. The United States imposed sanctions on Nord Stream accusing Moscow of using its energy resources “for coercion”.

The Kremlin accuses Washington of using unfair competition sanctions to promote more expensive US LNG.

Reporting by Sarah White in Paris and Scott DiSavino in New York, Additional reporting by Elizabeth Pineau in Paris, Shadia Nasralla in London and Gary McWilliams in Houston; edited by Richard Lough and Susan Fenton


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