What happened
Shares of NextDecade (NASDAQ: NEXT) rallied more than 18% by 1:30 p.m. EDT on Friday. Fueling the LNG stock was an agreement with Occidental Petroleum (NYSE: OXY) on a potential carbon dioxide transportation and storage project associated with its Rio Grande development.
So what
NextDecade has signed a term sheet with a subsidiary of Occidental for the offtake and permanent geological storage of carbon dioxide from its planned Rio Grande project in Texas. Under the terms, Occidental's Oxy Low Carbon Ventures will receive carbon dioxide from the site and transport it to an underground geologic formation in the Rio Grande Valley where there's ample storage capacity for carbon dioxide. This agreement will support NextDecade's proposed carbon capture and storage project associated with the Rio Grande liquified natural gas (LNG) development. It would enable the company to capture and store more than five million tonnes of carbon dioxide per year.
Image source: Getty Images.
This associated carbon capture and storage project will enable NextDecade to deliver on its aim to make Rio Grande one of the world's greenest LNG projects. The company hopes to achieve a final investment decision on at least two LNG trains at Rio Grande this year, and sanction the carbon capture and storage project soon after.
Now what
NextDecade has a bold goal of building the greenest LNG facility in the world. This agreement with Occidental Petroleum, a world leader in carbon storage, is an important step toward that goal. However, the company still has a long way to go as it will be years before Rio Grande starts producing cash flow, and that's if the company reaches a long-awaited final investment decision. That makes it a higher-risk way of investing in LNG.
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