Zachry Holdings Inc. (ZHI) has initiated Chapter 11 proceedings, citing financial challenges related to the Golden Pass LNG project; the move prompted fellow contractors Chiyoda Corporation and McDermott’s CB&I to begin discussions on how to successfully complete the project.
In February 2019, the three companies won engineering, procurement, construction, and commissioning contracts for LNG liquefaction and export facilities at the site of the existing Golden Pass LNG import terminal in Sabine Pass. Three trains, each with a capacity of 5.2 mtpa, are slated to begin operations this year, adding about 16 mpta of capacity to the facility. Joint venture partners QatarEnergy (then Qatar Petroleum) and ExxonMobil reached final investment decision (FID) on the $10-billion export project in February 2019.
Construction on the project began in 2019. In a 21 May news release, ZHI Chairman and CEO John B. Zachry said the company had navigated significant challenges and disruptions stemming first from the COVID-19 pandemic and, more recently, international geopolitical issues.
“These unforeseen disruptions have resulted in significant financial strain while meeting targets and keeping the project appropriately staffed,” he said.
He said ZHI had been transparent with Golden Pass as it worked to reach a mutually agreeable resolution to these issues.
“Because we have been unable to find a path forward, we have been forced to take action to protect our business. The process we are starting today provides us mechanisms to initiate a structured exit” from the Golden Pass project, he said.
On a website describing its restructuring, ZHI said its “other projects and company efforts continue to perform in line with expectations and are moving forward.”
ZHI didn’t immediately respond to an email requesting further details regarding the current completion status of its portion of the Golden Pass project.
White & Case LLP is serving as legal advisor to ZHI; M3 Advisory Partners LP is serving as financial and restructuring advisor. A hearing on the matter is slated for 17 June in Houston.
Moving Forward
In a 22 May news release, Chiyoda said its main scope of work, including design and procurement, is almost complete. Construction is ongoing and the overall project is 75% complete, according to Chiyoda.
Chiyoda, Golden Pass LNG, and McDermott’s CB&I are “having discussions about an execution plan to continue to work together to achieve the successful completion of the GPX Project upon a Zachry departure,” the Chiyoda news release stated.
Chiyoda, CB&I, and Zachry have worked together on other LNG projects, including the Freeport LNG Train 3, which received first gas in May 2020.
Qatar Petroleum holds a 70% interest in Golden Pass while ExxonMobil holds 30%. The two companies are independently marketing their shares of produced LNG from Golden Pass under an October 2022 agreement.
