NextDecade’s Rio Grande liquified natural gas expansion announcement should leave BlackRock and GIP investors scratching their heads

As the US liquefied natural gas (LNG) export industry is facing uncertainty brought about by unclear tariff plans and looming trade wars, NextDecade, the company building the Rio Grande LNG facility in South Texas, announced it was seeking to more than double the capacity of the facility’s liquefaction.

The expansion plan would bring the number of liquefaction trains planned for the site from five to eight, with the possibility of even more. Trains 1-3, with a capacity of 18 MTPA, are currently under construction. Trains 4 and 5 are planned and seeking Final Investment Decisions. If trains 1-8 are completed, the Rio Grande LNG facility would have a capacity of 48 MTPA. NextDecade CEO Matt Schatzman stated that the company could likely submit a full application to the Federal Energy Regulatory Commission (FERC) for train six, the first in the expanded plan, in early 2026. Notably, LNG demand may peak before 2030. 

Global Infrastructure Partners (GIP), owned by BlackRock, is the largest owner of Rio Grande LNG. Investors in GIP and BlackRock should be cautious about the economic outlook for LNG exports in an unpredictable market. Furthermore, investors should decline to invest in Rio Grande LNG’s expansion given possible market volatility. 

On-again off-again tariffs, trade wars create uncertainty for LNG exports

As President Trump imposed, escalated, and paused tariffs, then matched or exceeded retaliatory tariffs from other countries, industry experts have attempted to predict how the tariffs would affect LNG exports. While the short and long term effects of the tariffs are still being debated as the potential for daily changes continue, many analysts agree on one thing: more volatility creates uncertainty. As one example, importers may be less likely to enter into long-term purchasing agreements with developers, which could lead to LNG export companies failing to meet their Final Investment Decisions. Global market uncertainty should be cause for extra due diligence before investors pledge additional money to LNG export projects.

During President Trump’s early tariffs, the top buyers of US LNG would be hit with some of the highest tariffs. China, Japan, and the EU are some of the largest purchasers of US natural gas and each were targeted by President Trump’s early tariffs, with rates between 34% and 20%. In response, China announced retaliatory tariffs.

The trade war between the US and China has caused Chinese buyers to reroute shipments. China, typically the world’s largest LNG buyer, had not imported LNG from the US for 40 days as of mid-March, the longest gap in almost two years, due to tariffs. The tariffs continued to discourage Chinese imports of LNG into April, with China recording its lowest LNG demand since October 2022. 

Despite the LNG import pause from China, LNG has still been shipping out of US ports. Chinese buyers have been reselling cargos to European markets. There is still a significant market in Europe for US LNG, due to an “inelastic LNG demand” which is unlikely to change, despite higher costs from tariffs. Steady European demand for LNG may mean that the EU would be willing to negotiate for energy carveouts in future trade agreements, yet East Daley Analytics reported that, “deliveries to Europe only accounted for 53% of US exports in 2024. Depending how other nations react, the US LNG industry could see additional tariffs.”

Trade wars can contribute to general economic instability and downturn. According to Natural Gas Intelligence, a global recession “certainly wouldn’t be good for natural gas prices over the short term to midterm. That will impact domestic industrial demand. And it could impact demand for US LNG cargoes, all at a time when roughly 3 Bcf/d of new U.S. export capacity phases into the market.”

Tariffs on building materials likely to impact LNG

While tariffs may or may not directly affect US LNG exports, tariffs on construction materials are likely to make the construction of pipelines and liquefaction at export facilities more expensive. Reuters reported that, “even if the White House totally cancels country-specific reciprocal tariffs, those 25% tariffs on steel and aluminum and the 10% blanket levy remain in place putting pressure on LNG construction costs.”

According to Argus analysis, Rio Grande LNG may be particularly affected by tariffs on building materials. “NextDecade’s 17.4mn t/yr Rio Grande LNG project in south Texas had bought only 69% of supplies for trains 1-2 and only 33% for train 3 by late February, making the three-train project particularly vulnerable to higher steel prices.”

Further, Argus reported in April:

“US tariffs on steel and aluminum imports, imposed on 12 March, present an immediate risk for US LNG developers, particularly for the five projects currently under construction and the six others expected to reach final investment decisions in 2025.

“Metals represent up to 30% of the cost of building an LNG export plant. Depending on the project’s size, an LNG terminal could cost $5bn-$25bn, with steel used for pipelines, tanks and other structural frameworks. Although facilities can use some domestic supplies for construction, higher prices could result in delays to construction and final investment decisions in planned liquefaction projects.”

Economic challenges for LNG export facilities are not new. Reuters reported that, “since 2021, almost all U.S. LNG projects under construction have faced price escalation or cost overruns due to supply chain disruptions, labor shortages, high borrowing costs and other factors.” As one example, the project price for Rio Grande LNG increased by 29% from original pre-FID estimates. 

Trump’s rule about US ships for LNG exports

New rules about ships are further complicating the economics of US LNG exports. “In a move that shocked the industry, the US Trade Representative announced April 17 that LNG producers would have to transport 1% of their exports on US-built ships starting in April 2029. That percentage would escalate to 15% in April 2047 and beyond,” according to Reuters.  

There simply are not enough US-built ships to meet the requirement, and it could take as long as five years to build one carrier at either of the two shipyards in the country with long enough docks. The challenge to meet these new shipping requirements could put the US LNG industry at a disadvantage as it may not be able to meet the standards set out by the Trump administration.

Investing in a project with legal challenges and without stable financing is risky

The Rio Grande LNG project has faced significant legal challenges, with the DC Circuit Court questioning FERC’s environmental justice analysis. In March 2025 the District Court revised its earlier decision, sending the project back to FERC for further review, allowing construction to continue. NextDecade CEO Matt Schatzman said he was “pleased” about the decision, but the facts remain that this is a project sited within a sensitive ecosystem, with impacts that would affect Indigenous and Latinx communities nearby. 

Additionally, several financial institutions have abandoned Rio Grande LNG. Long before the expansion announcement, insurance company CHUBB backed out of the project. Societe Generale, BNP Paribas, and La Banque Postale have also pulled financial support from the project in the last several years.  

Local residents continue to raise concerns about the project

Nearby towns of Laguna Vista, South Padre Island, Port Isabel, and the Laguna Madre Water District formally oppose the project. Additionally, the facilities could degrade local fishing, shrimping, and natural tourism industries, putting communities’ livelihoods at risk. 

Investors should consider the risks associated with an expanded Rio Grande LNG facility and avoid investing more money in a project facing so many headwinds.