[Editor’s note: This story was updated at 11:05 a.m. CT Oct. 22.]
The French government asked power group Engie to hold off on signing a multibillion-dollar U.S. LNG import contract on concerns over the deal's environmental implications, a source familiar with the matter said.
The intervention comes amid growing scrutiny over the effects of shale gas extraction methods such as fracking and their impact on climate change through methane emissions, especially among U.S. producers.
However, it also comes against a backdrop of broader trade disputes between Europe and the U.S., with Paris and Washington engaging in retaliatory measures over plans to tax big digital companies, for instance.
Engie's contract would be with NextDecade Corp., which is due to decide whether to go ahead with plans to build its proposed Rio Grande LNG export plant in Texas as it tots up agreements with prospective customers.
The project was "not aligned with France's environmental project and environmental vision", the source said, adding that the request had come from the economy ministry.
A spokeswoman for Engie, which is part-owned by the French state, said the company's board had decided on Sept. 30 to give itself more time to study the NextDecade contract, saying "the project required a more detailed examination".
But she declined to comment on whether this followed a request from the state, while the French government had no immediate comment.
Politico and 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 commercial dealings, and added that the firm was working on measures to target carbon-neutrality at Rio Grande.
The company is grappling with concerns about the polluting effect of the natural gas provided to LNG processors by producers in Texas and elsewhere, and recently announced it had developed processes to reduce Rio Grande's CO₂ equivalent emissions.
NextDecade has put off its final investment decision on Rio Grande from this year to 2021, after government lockdowns to stop the spread of coronavirus cut global demand for gas.
French and U.S. environmental campaigners welcomed the delay in Engie's contract, though Lorette Philippot, of French activist group Amis de la Terre (Friends of the Earth), said she hoped this would lead to the deal never materializing.
"France must have zero-tolerance when it comes to shale gas," Philippot said.
The French government said earlier in October it would stop providing state export guarantees to projects involving dirty forms of oil such as shale from next year, followed by all types of oil from 2025 and gas from 2035.
Rebekah Hinojosa from the Sierra Club, a U.S.-based environmental group, said the setback for NextDecade should add to reasons not to build the facility.
But analysts at Height Capital Markets in Washington said the French state's intervention may have been motivated by broader trade concerns. Those trade tensions could ease, however, if U.S. Democratic presidential candidate Joe Biden wins against Donald Trump in a Nov. 3 election, in which case France could potentially approve the contract at a later date, they said.
"A Biden administration would likely work to reduce trade tensions," the analysts said, adding Biden had also pledged to strengthen methane regulations.
The European Union is the world's biggest gas import market and the U.S. is vying for market share with cheaper pipeline gas from Russia, which has also led to tensions.
Engie, alongside other European energy firms, is one of the financial backers of the Nord Stream oil pipeline project which is led by Russian oil giant Gazprom. The U.S. has imposed sanctions on Nord Stream accusing Moscow of using its energy resources "for coercive purposes".
The Kremlin accuses Washington of using the sanctions for unfair competition to promote pricier U.S. LNG.
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