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Golden Pass LNG Isn’t Taking the Easy Route

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Golden Pass LNG owners QatarEnergy and ExxonMobil (XOM) have filed with a bankruptcy court to oust Zachry Holdings as the lead contractor for the project under construction. Bucking market talk of a settlement, the companies intend to take matters into their own hands to finish the job.

Zachry Holdings, the lead engineering, procurement and construction (EPC) contractor for Golden Pass LNG, filed for Chapter 11 bankruptcy protection in May. Zachry cited financial strain caused by “significant challenges and disruptions,” including the Covid-19 pandemic and recent geopolitical issues.

On June 18, Golden Pass LNG filed a request to remove Zachry from the project and allow the owners to take control of construction in order “to prevent further long-term deterioration” of the facility on the Sabine River, TX.

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When Zachry filed for Chapter 11, many saw the move as a power play to force Golden Pass back to the negotiating table; finding a new EPC contractor would undoubtedly be more expensive and time-consuming. Zachry served as the lead contractor for project construction and was responsible for 52% of the total scope of work at Golden Pass.

After the latest filing, it’s clear Golden Pass has no intention of amending its EPC contract with Zachry. This latest uncertainty puts East Daley’s in-service date for Train 1 of July ’25 at risk in the Macro Supply and Demand Forecast.

Despite the setbacks, Golden Pass LNG has yet to revise the project schedule and says it is committed to completion. In a statement to a local Beaumont TV station, a spokesperson said work continues with the remaining EPC contractors McDermott and Chiyoda, with thousands of workers still at the site. Golden Pass LNG is 75% completed, the spokesperson said.

East Daley reviewed a potential delay at Golden Pass LNG earlier in May using the Macro Supply and Demand Forecast. We found a six-month delay would cut our Henry Hub forecast by ~$0.15/MMBtu through March ‘26. Despite the development, we remain bullish on the price outlook for 2025 as other new demand tightens the gas market. Even with a delay at Golden Pass, we expect prices to run up heading into next winter and average ~$3.75/MMBtu in 2025.

A delay at Golden Pass would remove ~219 Bcf of demand in the first half of 2025. Nevertheless, the demand outlook for gas remains strong in 2H24 and through 2025 with several other LNG projects planning to start, including Cheniere Energy’s (LNG) Corpus Christi Phase III project and Venture Global’s Plaquemines LNG. – Alex Gafford, Oren Pilant and Andrew Ware Tickers: XOM, LNG.


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