Zachry Holdings Inc. will exit as lead contractor for the Golden Pass liquefied natural gas export terminal near Port Arthur, Texas, under a proposed agreement with project owners ExxonMobil and Qatar Energy and co-contractors McDermott International and Chiyoda Corp. 

The pact, set to be approved on July 24 by a federal bankruptcy court judge in Houston, would settle months of legal charges and years of difficult relations among the parties over costs, payments and stalled work at the estimated $11-billion LNG megaproject. The dispute 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 on the project, and to the owner’s later filing that sought an emergency court order to remove the contractor from the site.

The owner entity, Golden Pass LNG LLC, is 70% owned by Qatar Energy Inc. and 30% by ExxonMobil.

Approval of the agreement would enable release of Zachry’s 52% share of the project contract and would allow 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. 

Originally set to finish by the end of this year, its first train now is anticipated to operate by next June, the owner has said. 

Following an operations halt that led to thousands of jobsite layoffs, work slowdowns 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 approval by federal bankruptcy Court Judge Marvin Isgur. 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 also 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. 

In a statement, Zachry declined comment on the settlement or to answer questions, pending completion of the judge's approval. But in the filing, Moshin Meghji, its chief restructuring officer, said the agreement follows “months of arm’s-length, hard-fought negotiations and discussions among the case parties, including through Court-ordered mediation.” 

Golden Pass LNG also declined to comment. “We await the court’s review of the motion and will not discuss its contents prior to the court’s ruling,” it said.