Golden Pass LNG Gets 3-Year Deadline Extension to Complete Construction

The Federal Energy Regulatory Commission (FERC) has allowed a liquefied natural gas (LNG) export project being built by Exxon Mobil Corp. and QatarEnergy in Texas to be delayed further to 2029, after the disgruntled main contractor gave up the project.

Golden Pass LNG Terminal LLC, the joint venture, had already been given a deadline extension lasting 2026 after the owners sought more time in 2019 due to delays in obtaining pre-construction authorizations from the FERC and the Energy Department. The project involves the expansion of an existing LNG terminal in Sabine Pass, Jefferson County, to add an additional export capacity of about 18 million tons per annum (MMtpa).

“In this latest filing, GPLNG states that, due to delays caused by the bankruptcy filing of the lead construction contractor, remaining schedule uncertainties related to the transition to a new lead contractor, and other possible delays outside of GPLNG’s control that may occur, such as potential hurricane impacts, and for commissioning and start-up activities, that additional time is required for completing construction of the project and placing it into service”, the FERC said in a recent decision.

Golden Pass now has until November 30, 2029, “to complete construction of the project and make it available for service”, stated the decision published on the FERC’s website.

About four months ago, a United States court approved a settlement agreement between Zachry Holdings Inc. (ZHI) and Golden Pass’ owners over the contractor’s financial troubles from the project.

“The settlement… creates a path for ZHI to complete its Court-supervised restructuring process on an expedited basis”, San Antonio-based ZHI said in a statement July 24. ZHI had filed for bankruptcy before the U.S. Bankruptcy Court for the Southern District of Texas to allow it to restructure finances and exit the project.

According to the text of the Chapter 11 complaint filed May 21 before the court, ZHI had to shoulder higher costs emanating from demands by Golden Pass to get the project back on track after it had gone beyond schedule and over budget due to “unexpected challenges”.

Added costs reached over $2.4 billion by mid-2022, according to the court filing. ExxonMobil and state-owned QatarEnergy have pegged their investment in the project at $10 billion. QatarEnergy holds a 70 percent stake in Golden Pass while ExxonMobil owns the remainder.

“The cost was extraordinary, but so was the payday ExxonMobil and QatarEnergy would receive once the facility was complete”, ZHI told the court in May. “Yet, Golden Pass and its owners refused to foot the bill for accelerating work on the Project and overcoming all the challenges (some of which it created)”.

ZHI and partners Chiyoda International Corp. and McDermott International Inc. won the engineering, procurement and construction (EPC) contract for the project in 2019.

“The comprehensive settlement agreement fully resolves all financial and legal disputes among the parties”, ZHI said in the July statement on its website.

“The settlement allows Golden Pass to resume construction on an expedited basis while Zachry will exit the project in an efficient and cooperative manner”.

It allows ZHI to demobilize employees and some assets, according to the terms of the agreement attached to the court’s interim order.

Golden Pass said in a statement July 29 the approval of the settlement “allows Golden Pass and our construction contractors McDermott and Chiyoda to ramp up site construction activities and progress our LNG terminal”.

While the Biden administration has paused pending decisions on LNG export to countries with no free trade agreement (FTA) with the U.S., Golden Pass earlier secured a permit to export to non-FTA nations. The project may send up to 18.1 MMtpa of LNG to countries without an FTA with the U.S., up by 2.5 MMtpa from the original authorization, according to a press release by ExxonMobil April 27, 2022.

To contact the author, email jov.onsat@rigzone.com