Contractor for QatarEnergy-Exxon LNG Plant in Texas Files for Bankruptcy
(Reuters) — The lead contractor building a Texas LNG plant for QatarEnergy and ExxonMobil on Tuesday filed for Chapter 11 bankruptcy protection, citing challenges at the project.
Zachry Holdings, which held the lion's share of the $10 billion construction project called Golden Pass LNG, said it was pursuing a "structured exit." Exxon said it would review construction timing and provide an update in the future.
Golden Pass LNG is being built at the site of a former gas-import terminal that has been converted to process natural gas for LNG exports. It is one of two large U.S. LNG terminals whose startup will significantly expand exports in the next 12 months.
"We, along with the other stakeholders, are considering all available options to implement a smooth transition and minimize any impacts," an Exxon spokesperson said. "We plan to continue to fully support Golden Pass LNG through completion."
Exxon, which owns a 30% stake in the project, said earlier this year that it expected its first LNG production in the first half of 2025.
"Because we have been unable to find a path forward, we have been forced to take action to protect our business," John Zachry, CEO of the San Antonio, Texas-based company, said in a statement on Tuesday.
Zachry Holdings said it faced cost challenges over a change order and billings schedule, and it engaged in negotiations with Golden Pass LNG for additional funding without success, according to its filing in U.S. Bankruptcy Court for the Southern District of Texas.
Zachry's share of the project was valued at $5.8 billion.
Prior to April 2024, Zachry said it was incurring weekly expenses of $30 million to $40 million for payroll, vendor payments, equipment and other costs, but was receiving approximately $70 million per month from Golden Pass LNG.
“In March of this year, Golden Pass began direct-paying vendors, and clawed back much of those funds from advance progress payments due to Zachry,” the filing said.
In April, Golden Pass stopped the progress payments altogether.
On May 8, Golden Pass notified Zachry of default of its engineering, procurement and construction contract, citing, among other factors, Zachry’s inability to pay subcontractors and vendors promptly, the court filing showed.
Zachry that same day received a notice of default from another Golden Pass contractor, Chiyoda International, the company said. Unable to reach an agreement with Golden Pass, Zachry said it had no choice but to file for Chapter 11 protection.
Golden Pass LNG had warned earlier this month of possible impacts on construction of the first three trains of the project, which was designed to produce up to 18 million metric tons per annum of LNG. The project is one of two large LNG export plants that had been expected to expand U.S. exports in the next 12 months.
The United States is the largest exporter of LNG.
Related News
Related News
- Trump Aims to Revive 1,200-Mile Keystone XL Pipeline Despite Major Challenges
- Valero Considers All Options, Including Sale, for California Refineries Amid Regulatory Pressure
- ConocoPhillips Eyes Sale of $1 Billion Permian Assets Amid Marathon Acquisition
- ONEOK Agrees to Sell Interstate Gas Pipelines to DT Midstream for $1.2 Billion
- Energy Transfer Reaches FID on $2.7 Billion, 2.2 Bcf/d Permian Pipeline
- U.S. LNG Export Growth Faces Uncertainty as Trump’s Tariff Proposal Looms, Analysts Say
- Tullow Oil on Track to Deliver $600 Million Free Cash Flow Over Next 2 Years
- Energy Transfer Reaches FID on $2.7 Billion, 2.2 Bcf/d Permian Pipeline
- GOP Lawmakers Slam New York for Blocking $500 Million Pipeline Project
- Texas Oil Company Challenges $250 Million Insurance Collateral Demand for Pipeline, Offshore Operations
Comments