New Delhi

Zachry Holdings, the primary contractor for the construction of the $10 billion Golden Pass LNG project in Texas, jointly owned by QatarEnergy and Exxon Mobil, filed for Chapter 11 bankruptcy protection on Tuesday.

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The company cited challenges at the project site as the main reason for this move.

The Golden Pass LNG facility, situated at a former gas import terminal now being converted for LNG exports, is one of two major US LNG terminals expected to boost export capacity within the next year.

Zachry Holdings, which held a $5.8 billion stake in the project, announced it was pursuing a "structured exit" from the project.

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Exxon Mobil, holding a 30 per cent stake, plans to review the project's timeline and provide updates in due course.

"We, along with the other stakeholders, are considering all available options to implement a smooth transition and minimise any impacts," an Exxon spokesperson said in a statement.

The spokesperson also said that the group would “continue to fully support Golden Pass LNG through completion”.

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Exxon had projected the start of LNG production in the first half of 2025.

However, John Zachry, CEO of Zachry Holdings, said that the company was compelled to seek bankruptcy protection after failing to resolve cost and billing issues with Golden Pass LNG.

"Because we have been unable to find a path forward, we have been forced to take action to protect our business," Zachry explained.

The financial strain on Zachry Holdings intensified when Golden Pass LNG began direct payments to vendors in March, which reduced the funds Zachry received from advance progress payments.

This resulted in Zachry incurring weekly expenses between $30 million and $40 million while receiving only about $70 million per month from Golden Pass LNG.

Court filings revealed that on May 8, Golden Pass LNG notified Zachry of default on its engineering, procurement, and construction contract, citing Zachry’s failure to promptly pay subcontractors and vendors.

Additionally, Chiyoda International, another contractor for Golden Pass, issued a notice of default to Zachry on the same day.

These defaults precipitated Zachry’s bankruptcy filing after failing to secure additional funding from Golden Pass LNG.

Despite the turmoil, rival LNG developer Venture Global LNG stated that Zachry's bankruptcy would not materially impact work at its Plaquemines LNG export facility in Louisiana, which is being constructed by a joint venture between KBR and Zachry.

Golden Pass LNG had previously warned of potential delays in the construction of the project's first three trains, which are designed to produce up to 18 million metric tons per annum of LNG.

This development threatens to disrupt plans to expand US LNG exports, with the United States currently being the largest exporter of liquefied natural gas.

(With inputs from Reuters)