France's government has blocked a proposed $7 billion offtake deal that would allow French trading firm Engie to buy liquefied natural gas from NextDecade's planned Rio Grande LNG project in Texas, according to reports.

The Paris administration, which is a part owner of Engie, told the trader's board of directors last month to delay or cancel the deal because of concerns over flaring in the prolific Permian basin, where the facility's feedstock would be sourced, news site Politico reported on Wednesday.

The report cited French media as well as people familiar with the matter.

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The move marks another blow for NextDecade, which has struggled to sign up buyers for the 27 million tonnes per annum facility and faced strong local and global opposition because of Rio Grande LNG's potential impacts on the environment and climate change.

The company has only sold 2 million tonnes per year of the project's entire offtake, under a 20-year sale and purchase agreement with Shell. It believes it can take a final investment decision with an additional 9 million tpa sold under long-term contracts.

The company has scrambled to adapt. In recent months, it has announced redesigns of the Rio Grande LNG project, including reducing the scope from six to five trains, and a plan to make the terminal carbon neutral primarily through carbon capture and sequestration.

"Our LNG customers in Europe and around the world are acutely aware of the long-term benefits of purchasing reliable, clean-burning U.S. natural gas," NextDecade senior vice president of strategy and business development Patrick Hughes said in an emailed statement.

"NextDecade is proud of its leadership in environmental and social performance, which aligns with the goals of many of our customers amid the global energy transition. We recently announced that we are targeting carbon-neutrality at Rio Grande LNG, and our work to date confirms that reliable, competitively priced LNG and responsible environmental stewardship are not mutually exclusive. NextDecade is engaged with a significant number of prospective customers that reflect the global nature of the LNG business. As a matter of company policy, we do not discuss the details of our commercial engagements with any parties other than those with whom we are in direct and ongoing negotiations."

Engie declined to comment.

Spotlight on venting and flaring

Analysts said the news highlighted the growing importance of environmental concerns in the natural gas space, which has long been seen as the clean alternative to dirtier fossil fuels like coal and oil.

"It remains to be seen if the deal will ultimately be consummated or not, but the news puts a spotlight on venting and flaring practices, which have drawn greater scrutiny domestically of late as well," analysts at Tudor Pickering Holt said in a note on Thursday.

"All of this points to an increasing focus on environmental impacts and an extension of the competitive landscape beyond price."