US-based NextDecade has signed a long-term deal to supply liquefied natural gas (LNG) to China Gas Hongda Energy Trading from its Rio Grande LNG export project in Brownsville, Texas.

Under the 20-year sale and purchase agreement (SPA), China Gas will receive one million metric tonnes of LNG per annum from the planned Rio Grande project.

Indexed to Henry Hub, LNG will be delivered on a free-on-board basis.

NextDecade plans to deliver the LNG from the second train at the Rio Grande LNG project, which is planned to start production as early as 2027.

NextDecade chairman and CEO Matt Schatzman said: “We are pleased to announce the signing of this long-term SPA with China Gas, one of China’s largest natural gas distribution companies, supplying approximately 43 million households across China.

“This SPA demonstrates the continued acceleration of RGLNG’s commercial momentum and highlights our successful strategy of offering customers flexible, competitive, and low carbon-intensive LNG.”

NextDecade plans to make positive final investment decisions (FID) on three trains of the Rio Grande LNG export project in the second half of this year.

This is based on current and anticipated LNG demands and assuming further LNG contracting and financing deals.

China Gas Hongda Energy Trading general manager Yalong Qi said: “The signing of this long-term SPA with NextDecade will further optimise China Gas’s portfolio, expand resource supply channels, and ensure that we can meet our customers’ growing demand for quality, reliable, and low carbon content energy.

“This SPA demonstrates China Gas’s determination to unswervingly implement China’s national low-carbon energy development strategy.”

At full scale, the Rio Grande LNG project will have a production capacity of 27 million metric tonnes of low carbon intensive LNG, enough to meet the annual heating demand of nearly 20 million households.

New long-term LNG contracts by the energy firms increased production this year as concerns rise over energy security amid soaring gas demands, which is further impacted by Western sanctions on Russian fuel, according to Reuters.