Zachry Holdings Inc. will step down as prime contractor for the Golden Pass LNG export terminal near Port Arthur, Texas, under a proposed deal with project owners ExxonMobil and Qatar Energy and co-contractors McDermott International and Chiyoda Corp.
The deal, which will be approved July 24 by a federal bankruptcy judge in Houston, would resolve months of legal charges and years of difficult relations between the parties over costs, payments and work stoppages at the estimated $11 billion LNG megaproject . The dispute ultimately led to Zachry filing bankruptcy proceedings in May for the corporation and 20 units, citing “significant financial strain” from ongoing cost and schedule disputes over the project, and the owner’s subsequent filing that was seeking an emergency court order to remove the contractor from the site.
The owner entity, Golden Pass LNG LLC, is 70% owned by Qatar Energy Inc. and 30% of ExxonMobil.
Approval of the settlement would release Zachry’s 52 percent share of the project contract and allow McDermott and Chiyoda to immediately take over work to complete the project under a new contract, the July 19 court filing said . McDermott and Chiyoda had respective stakes in the project of 22% and 20%.
The former team has worked on the project since 2019. The work, which is estimated to be more than 75% complete, involves the construction of a three-story facility that will produce 18 million metric tons per year of LNG for export.
Originally due to be completed by the end of this year, its first train is now expected to run next June, the owner said.
After an operations shutdown that resulted in thousands of job layoffs, work slowdowns and blame being placed on both sides, attorneys for the contractor and the owners began settlement talks in June.
Under the deal, Zachry would be paid by Golden Pass LNG to begin exiting the project within five days of federal bankruptcy judge Marvin Isgur’s approval. The amount was redacted from the filing, as was the amount of the owner’s obligation to cover Zachry’s payments to vendors and subcontractors. The pact releases Zachry from claims on the project, with the contractor also agreeing to end its pending lawsuit against Golden Pass LNG and legal claims also against McDermott and Chiyoda.
Zachry said he has already made a significant investment of time and money in the legal issues “before a single document has been produced or a single witness has been testified.” The settlement filing said the case would have taken “months if not years to litigate,” not including a potential appeals process.
The agreement also entitles Golden Pass to exercise its rights to draw on a $213 million letter of credit issued by Bank of Ameroca on Zachry’s behalf, while the contractor has agreed to transfer the site’s equipment to Golden Free pass.
In a statement, Zachry declined to comment on the settlement or answer questions pending the judge’s approval. But in the filing, Moshin Meghji, its chief restructuring officer, said the deal follows “months of free and hard-fought negotiations and discussions between the parties to the case, including through Court-ordered mediation.”
Golden Pass LNG also declined to comment. “We await the court’s review of the motion and will not discuss its content prior to the court’s decision,” he said.
