Megaproject Dispute
UPDATE: Zachry Exits Big Texas LNG Project in Deal With Exxon, Qatar Energy
But Exxon CEO told investors Aug. 2 that long turmoil at $11B Golden Pass gas export terminal forces six-month startup delay, to end of 2025
Owners confirmed Aug. 2 that construction finish of $11B Golden Pass LNG export terminal in Texas is pushed back six months in wake of long running project payment dispute that resulted in exit of main contractor Zachry Holdings, with former JV partners Chiyoda and McDermott Intl. taking over work
Photo Golden Pass LNG LLC
AUGUST 3 UPDATE:
The long project pay dispute between contractors and owners at the estimated $11B Golden Pass liquefied natural gas export terminal project south of Port Arthur, Texas, has done what energy market analysts feared—delayed its initial startup by six months to December 2025—Darren Woods, CEO of co-owner ExxonMobil confirmed during the energy giant's second-quarter results call on Aug. 2.
Zachry Holdings Inc. no longer is lead contractor for the facility, which it had been since 2019, under an interim agreement with ExxonMobil and co-owner Qatar Energy and co-contractors McDermott International Inc. and Chiyoda International Corp. that was approved July 24 by a federal bankruptcy court judge in Houston. The other contractors now will complete the project, one of the largest LNG export facilities in the U.S., which was originally set to finish by the end of 2024.
Work that was estimated to be more than 75% complete, involves construction of a three-plant addition that will produce 18 million metric tons annually of LNG for export.
The new project team "is in the process ... of re-staffing and getting started back up again," Woods told investors. "Obviously, we're in the very early days of that. So there's still more work to be done." He said project owners "had anticipated first LNG in the middle of next year, but we are now looking at probably the back end of 2025 for first LNG."
That supply would come from completion of the first plant, or "train," at Golden Pass, with its other two trains also delayed by six months each.
Resolution of the project turmoil was accelerated after Zachry's bankruptcy filing in May in the Houston court for the corporation and 20 units, citing “significant financial strain” from ongoing cost and schedule disputes.
The pact, although still subject to final court approval that could occur later in August, settles months of legal charges and several years of difficult relations among the parties over costs, payments, major layoffs and stalled work at the LNG megaproject. The issues eventually led to bankruptcy proceedings by Zachry begun in May for the corporation and 20 units, citing “significant financial strain” from ongoing cost and schedule disputes. The owner, Golden Pass LNG LLC, later filed an emergency court order to remove the contractor from the site.
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The owner entity is 70% owned by Qatar Energy and 30% by ExxonMobil.
The agreement enables release of Zachry’s 52% share of the project contract and allows McDermott and Chiyoda to immediately take over work to complete the project under a new contract, said the July 19 court filing. McDermott and Chiyoda had respective project stakes of 22% and 20%.
"By dusk tonight, Zachry will no longer have any control or right to direct the project,” U.S. Bankruptcy Court Judge Marvin Isgur said at a July 24 hearing on the agreement.
Following an operations halt that led to thousands of jobsite layoffs and blame attributed to both sides, attorneys for the contractor and owners began settlement talks in June.
According to the agreement, Zachry would receive payment from Golden Pass LNG to begin exiting the project within five days after Isgur's approval. The amount was redacted from the filing, as was the amount of the owner’s obligation to cover Zachry payments to vendors and subcontractors. The pact releases Zachry from project claims, with the contractor also agreeing to end its pending lawsuit against Golden Pass LNG and legal claims against McDermott and Chiyoda.
Zachry said it has already made a major investment in time and money on the legal issues “before a single document has been produced or a single witness deposed.” The settlement filing said the case would have taken “months if not years to litigate to judgment,” not including a potential appeals process.
The settlement also entitles Golden Pass to exercise its rights to draw on a $213-million letter of credit issued by Bank of America on Zachry’s behalf, while the contractor has agreed to transfer site equipment to Golden Pass without charge.
The agreement "fully resolves all financial and legal disputes among the parties ... and allows Golden Pass to resume construction on an expedited basis," Zachry said in a statement, while the firm exits the project and expedites its bankruptcy restructuring process. Company Chairman and CEO John B. Zachry said the firm will complete the process in the fall.
In its statement July 24, Golden Pass had said the agreement allows the owner, McDermott and Chiyoda "to ramp up site construction activities and progress our LNG terminal."
But the confirmed six-month startup delay "will remove a fair amount of new supply from the market in a period of intense growth, shifting the surge from 2026 to 2027 and impacting both the global and North American gas markets," energy market research firm Wood Mackenzie said in an Aug. 2 update
The delays for all Golden Pass trains "will remove 2.3 million metric tons per year and 5.2 mmtpa of growth from its forecast of supply in 2025 and 2026," said Mark Bononi, the firm's principal North America gas and LNG asset analyst.
“Because of its size, Golden Pass LNG’s deferment could briefly impact global LNG prices and US natural gas production and prices," he said. "Depending on the project’s construction, there remains risks of further delays ... and it could signal challenges to other US LNG projects.”
