After recent weeks of new legal filings and accusations exchanged by San Antonio contractor Zachry Holdings Inc., its joint venture partners and two oil and gas giants in a battle over pay, layoffs, lost work and leadership of projects in the Golden Pass estimated at 10.5 billion dollars. liquefied natural gas export terminal expansion project in Texas, settlement talks appear to be ongoing, according to court documents and company statements.
Proposals to resolve the dispute were filed last month in federal court in Houston as part of bankruptcy proceedings that Zachry filed in May for the corporation and the 20 units, citing “significant financial strain” from the disputes ongoing cost and schedule discussions on the project near Port Arthur, in which owners Qatar Energy and ExxonMobil have 70% and 30% stakes respectively. Zachry is the prime contractor on the project, with joint venture partners McDermott International and Chiyoda Corp.
The work, which is estimated to be more than 75% complete, involves the addition of three plants that will produce 18 million metric tons of LNG per year.
After an operations shutdown that resulted in thousands of job layoffs, work slowdowns and blame placed on both sides, attorneys for the contractor and the owners at a June 27 hearing “re-engaged in productive discussions to reach a comprehensive resolution,” says a source. close to the negotiations. They are seeking more time to resolve the major dispute without court intervention and before a final bankruptcy court hearing set for Aug. 12.
“We’re all going to work as hard as we can between now and then to try to make a hearing unnecessary,” said Louis Strubeck, an attorney for the Golden Pass project. “We have some issues to sort out … in a really complicated situation,” he said. “There’s still a lot of work to be done,” but there was “pretty good progress,” said Zachry’s attorney, Bojan Guzina.
“Substantial Damage”
“It is undisputed that Zachry has abandoned the LNG facility and, in any event, is unable to perform under the … contract,” said a June 18 Golden Pass filing seeking an emergency injunction to remove Zachry from the site. “It is also undisputed that Zachry’s actions have caused and continue to cause immediate and substantial harm that is compounded every day. The order is necessary so that the owners of Golden Pass and the other contractors may begin the work of rehiring as many workers and subcontractors … and stop the damages,” says the filing, which claims “intentional and vindictive steps” by Zachry to harm the project, including stopping payments for labor criticality and support of equipment, abandoning work on a critical dock and safety risks.
“The scale and complexity of the facility components that remain partially completed and exposed to the elements cannot be underestimated,” the filing says. “Zachry continues to try to hold the EPC contract hostage rather than agree to transfer any incremental scope of work necessary … to begin the process of bringing back thousands of workers and dozens of vendors and subcontractors.” Golden Pass claims that the actions have caused damages exceeding $2 billion Chiyoda supported the emergency order in a separate document.
But in a June 25 court filing, Zachry says he learned in April that Chiyoda and McDermott had formed their own joint venture and were hiring the former parent company’s subcontractors, and also noted rumors of financial incentives granted to continue working.
Zachry also notes “no justification” for the emergency order, stating that the contractor “made all necessary arrangements” to ensure the integrity of the project and the safety of the workforce. “Any alleged damage to Golden Pass while [the Zachry companies] using the time allocated by law to make the decision to take or reject the EPC contract is purely economic and of [the owner’s] own manufacture,” the contractor’s filing says. He is asking for a delay of the hearing until near the end of September.
“adequate compensation”
In a separate filing, Zachry Industrial EPC Chief Operating Officer Alan P. Fagan, who has led work on the project since 2018, says the contractor “has been working cooperatively” with Golden Pass and the other partners of the JV for the transition of former workers.
But in a statement, Zachry says hopes to “receive fair and appropriate compensation” for its role in the construction joint venture, stressing the unlikelihood of “a modified EPC contract and … a structured exit being the most likely outcome at this time.” [the firm] is coming out of bankruptcy”
A late June court filing by Zachry also wants new documents and financial data from ExxonMobil, Qatar Energy and the remaining site contractors to be reviewed because of “possible fraud.”
But Zachry also faces a separate lawsuit filed by a former employee who claims she was fired after the bankruptcy filing, and that of about 4,000 others filed in the state, was filed without 60 days’ notice, as required by Texas law. The lawsuit, which seeks damages, is intended to become a class action. In a statement, the contractor says it is “aware of its obligations under the [law] and believes it met those requirements. As we have previously noted, the recent layoffs are the direct result of the failure of Golden Pass and its shareholders to act in good faith or honor their commitments.”
Zachry says the problems forced him to file for Chapter 11 “in order to protect his business, which is otherwise very strong.”
The owners of Golden Pass have not updated the expected time impact of the dispute on the start of the export terminal, but analysts had speculated the first operation of the train at the end of next June, with trains two and three in December 2025 and March 2026, according to regulatory filings, Reuters said. in June
Golden Pass has also asked the Federal Energy Regulatory Commission to allow it to accelerate work on a related pipeline and compressor station project, requesting 24/7 work hours for some construction functions through Dec. 31. January 2025 and an increase in the peak workforce to 650.