QatarEnergy, Exxon seek to remove contractor from Texas LNG project

Owners of a $10bn liquefied natural gas (LNG) project that has stalled with the bankruptcy of its main contractor are asking a court to immediately oust Zachry Industrial from the project, a court filing showed.

Zachry, which held the lion’s share of the contract to build Golden Pass LNG, filed for Chapter 11 bankruptcy last month after suffering enormous cost overruns and said it was pursuing a “structured exit.”

Golden Pass LNG, a joint venture between QatarEnergy and Exxon Mobil, asked a US bankruptcy court late on Tuesday to sever Zachry’s $5.8bn contract within five days or allow it to take possession and control of the facility, which is about 75 per cent complete.

“Zachry has stopped performing its obligations under the EPC (engineering, procurement and construction) contract, fired thousands of workers, stopped paying its subcontractors and abandoned the Golden Pass project that it committed to building at a lump-sum fixed price,” the filing said.

Zachry, based in San Antonio, Texas, said it expects “to receive fair and appropriate compensation” for its role in the construction joint venture.

“We realise it is unlikely we will come to an agreement on an amended EPC contract and we consider a structured exit to be the most likely outcome by the time Zachry is exiting bankruptcy,” a spokesperson for the contractor said in a statement.

Zachry previously said the project cost had ballooned by $2.4bn from pandemic-related challenges, change orders and billing schedules, and it had been unable to resolve the difference with the owners.

“Golden Pass and its shareholders have left a trail of others harmed in their wake, including thousands of employees who lost their jobs and local vendors and suppliers not paid for their work. As we seek to resolve this matter through the legal process, our work is continuing, fully funded and fully staffed, across our other projects nationwide,” Zachry’s statement said.

Golden Pass LNG told the court it needed to immediately take over the contract and resume construction “to prevent further long-term deterioration” of the partially built project. “The scale and complexity of the LNG facility components left partially completed and exposed to the elements can’t be understated,” Golden Pass said.

The project, which was expected to start processing natural gas this year, has not updated its completion schedule.

“Time is of the essence here: with every passing day, the damage being caused by Zachry – to itself and everyone else – only proliferates and becomes more difficult to remedy,” Golden Pass LNG said.

 Read: How the GCC is fueling the transition to clean energy