No Golden Pass for $10 billion US LNG project: Start-up bumped to late 2025 as long-term construction plan talks go on

Following the bankruptcy of its lead contractor, the construction work on a liquefied natural gas (LNG) export terminal project in Sabine Pass, Texas came to a standstill, thus, a short-term construction plan was put in place until the contractor’s withdrawal was sorted out. Discussions are underway for a long-term construction completion plan to ensure all activities will resume at full scale to bring the project to life without further hiccups.

The development of the Golden Pass LNG (GPX) export terminal project, which ExxonMobil and QatarEnergy joint venture (JV) are developing, hit a snag in May 2024, when the project’s contractor, the U.S.-headquartered Zachry Holdings (ZHI) and some of its subsidiaries initiated a voluntary court-supervised Chapter 11 bankruptcy protection process to address the financial challenges stemming from the LNG export terminal under development in the Lone Star State.

While acknowledging the bankruptcy filing by Zachry, a party to the engineering, procurement, and construction (EPC) contract for its LNG terminal, the operator confirmed that work continued on the project with McDermott and Chiyoda International Corporation (CIC), the other two parties to the EPC contract. At the time, the project was already 75% complete. Before the contractor issue arose, the first LNG was targeted for H1 2025 from Train 1.

Once QatarEnergy and ExxonMobil hammered out the details to independently market LNG produced at the terminal, ExxonMobil LNG Asia Pacific (EMLAP) was provided with the exclusive rights to market 30% of Golden Pass LNG volumes with QatarEnergy Trading marketing the remaining 70%. Last year, Jumbo-SAL-Alliance, a joint venture between Jumbo Shipping and SAL Heavy Lift, completed the transport of modules for the project.

After the U.S. Bankruptcy Court for the Southern District of Texas approved Zachry’s settlement agreement with Golden Pass LNG terminal and joint venture partners, CB&I and Chiyoda, in late July 2024, the U.S. firm confirmed the full resolution of all financial and legal disputes related to the export terminal project. According to ZHI, the comprehensive settlement agreement allows Golden Pass to resume construction on “an expedited basis,” enabling the firm to exit the project in “an efficient and cooperative manner.”

John B. Zachry, Chairman and CEO of ZHI, commented: “The settlement resolves all of the issues we set out to address regarding the Golden Pass LNG project when we initiated our restructuring process earlier this year. This important milestone paves the way for us to move forward as a stronger company, better positioned for long-term growth and success.

“Zachry has a 100-year record of serving customers and helping them build, maintain and turnaround their critical facilities, and this commitment has never wavered. As we turn our focus to completing and exiting from our court-supervised process this fall, we continue to operate all other projects without interruption at the highest safety and quality standards.”

Golden Pass interpreted the court’s approval of the interim order associated with Zachry’s motion in bankruptcy court as a green light for its remaining contractors, McDermott and Chiyoda, to ramp up site construction activities and progress the LNG terminal.

“Going forward, we are focused on getting people back to work, including local workers and vendors, and progressing this critical energy project. We are committed to a safe and successful completion of this world class facility,” underlined the terminal operator.

A short-term plan to resume Zachry’s portion of the construction work was put in place between CIC, Golden Pass LNG terminal, and the other JV partner, CB&I, on August 7, 2024, with GPX placing an official order to continue business operations.

As the U.S. firm’s withdrawal is expected to be finalized upon court approval, scheduled within this month, CB&I and CIC intend to accelerate discussions with GPX regarding the go-ahead for a long-term construction completion plan and amendment of the EPC contract to resume the project at full scale.

“There will be no burden on CIC as a result of the official order from GPX based on the short-term plan, and the impact on the financial statements for the fiscal year ending March 2025 due to the transfer-back of reserves for losses recorded in the fiscal year ending March 2024 is minimal,” emphasized Chiyoda.

While the short-term construction plan is now expected to give way to a long-term one, the recent setback has led to a revision of the project’s start-up timeline. As a result, the Golden Pass LNG export project is now slated to be put in operation in late 2025, six months after the previously anticipated date, as confirmed by Kathy Mikells, ExxonMobil’s CFO.

Developers claim that Golden Pass LNG will add natural gas liquefaction and export capabilities to the existing terminal in Sabine Pass, giving rise to hundreds of direct jobs and supporting the supply of cleaner energy from Texas to power the world, since LNG is seen as a bridge fuel during the energy transition journey to a more sustainable future.

Located about 10 miles south of Port Arthur in Jefferson County, Texas on the Sabine-Neches Waterway, the $10 billion investment in infrastructure on the Gulf Coast, with an estimated annual send-out capacity of around 18 million tons of LNG, is said to secure a perfect fit for an LNG terminal due to Port Arthur being perceived as one of few deepwater ports along the Gulf Coast suitable for LNG carriers.

While Golden Pass LNG seems to have weathered the latest crisis, the project is not out of the woods yet, as the long-term plan needs to be ironed out to finish the construction works and bring the terminal online.

Recently, two other LNG export projects under construction in Texas ran into roadblocks in the form of a U.S. court ruling, which vacated the previous authorizations and returned the ball to the Federal Energy Regulatory Commission’s court.

While the ongoing war on fossil fuels over climate change concerns runs in the background, multiple plans for more LNG infrastructure are underway to meet the growing gas demand and fortify energy security while pushing the transition from coal to gas to new heights as part of decarbonization efforts.