Zachry Holdings Inc. no longer is lead contractor for the Golden Pass liquefied natural gas export terminal near Port Arthur, Texas, under an interim agreement with project owners ExxonMobil and 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 pact, although still subject to final court approval that could occur 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 estimated $11-billion 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.

The owner entity is 70% owned by Qatar Energy Inc. 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%. The former team has worked on the project since 2019. Work, 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. 

"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.

Originally set to finish by the end of this year, its first train is anticipated to operate by next June, the owner said previously, with no further updates provided. 

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 settlement "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, Golden Pass said the agreement allows the owner, McDermott and Chiyoda "to ramp up site construction activities and progress our LNG terminal."