Word on the street was they were overpaid after over progressing work.
https://www.12newsnow.com/article/news/local/power-city/lead-golden-pass-lng-contractor-zachry-announces-chapter-11-bankruptcy/502-20e23824-45ec-49cc-a09b-6c5ccd134ad9?utm_medium=social&utm_source=facebook_12NewsNow&fbclid=IwZXh0bgNhZW0CMTEAAR12wiZ8LuUL5yG5lD-e78vtT2zm0EVZVj5j6Onm83Xc-TZ_CbP0E-csO0s_aem_AdlooqBbgy24Eiysc8tibOxsu7vo7fmgiHXXXsaoWCv-b-ZOYuaMGTCdAH85z2LDkUZSBp9c5rqbFVuIJZMyiOD5
The 70% owner doesn’t pay change orders. Period. No exceptions. They would rather bankrupt their EPC contractors than pay a change order.
At least half of project management representatives have zero experience on actual Design, Engineering, Planning, Procurement, Contracting, and Construction. They are primarily an information conduit between Contractor management and higher owner or JV management. A project always goes bad when the team is no longer a team. Forget the structure of the contracts. If the goals are not aligned then it’s going to bow up. Pointing at the contract is one of the last signs, not the first. From what I’ve read Zachary was aligned with project goals and completions, and even now in chapter 11 would still be interested in successful resolutions, while the JV and owners prefer to lawyer up. But the JV project management is more interested in the blame game than building a successful project. Why? Three reasons, likely more.. 1) Protecting individual career over project objectives. 2) They had warning signs and could have done a little to make a lot of difference in the team long ago, but chose a “safer” path to ignore and disbelieve and shift blame to “poor contractor performance” - aka bull***t, while also limiting contractors abilities. 3) LNG prices have plummeted and projected to be down, and business economics are likely not as desired as they once were and letting the main contract go bankrupt protects the JV partners from more negative cash flow exposure in the short term.
I’ve definitely seen these patterns before on mega projects and can wager none of the real reasons or failed opportunities will ever end up in any version of lessons learned that ever sees the light of day.
I heard the CEO went to the campus and screamed at the top of his lungs, "I declare Bankruptcy".
Incompetence and sc-mbaggery from Zachry? What next, water is wet?
Not so shocking. Would be interesting to know what happened.
Maybe stop blaming EM and look at the 70% owner of the project and the contracting methods administered.
Another fine mess by ExxonMobil going for the low cost option which will cost them so much more in lost revenue.
Global Projects qualified this supplier. They are responsible for manging the risk! Roll a VP for this and make an example!
Check out the document issued by Zachry
https://www.kccllc.net/zhi/document/2490377240521000000000051
GBS/ PROCUREMENT always pick the best vendors.
Not.
LNG in Global Projects is a mess. And not getting any better with current VP & Sr Mgrs
By Curtis Williams
HOUSTON (Reuters) -The lead contractor building a Texas liquefied natural gas (LNG) plant for QatarEnergy and Exxon Mobil on Tuesday filed for Chapter 11 bankruptcy protection, citing challenges at the project.
Zachry Holdings, which held the lion's share of the $10 billion construction project called Golden Pass LNG, said it was pursuing a "structured exit." Exxon said it would review construction timing and provide an update in the future.
Golden Pass LNG is being built at the site of a former gas-import terminal that has been converted to process natural gas for LNG exports. It is one of two large U.S. LNG terminals whose startup will significantly expand exports in the next 12 months.
"We, along with the other stakeholders, are considering all available options to implement a smooth transition and minimize any impacts," an Exxon spokesperson said. "We plan to continue to fully support Golden Pass LNG through completion."
Exxon, which owns a 30% stake in the project, said earlier this year that it expected first LNG production in the first half of 2025.
"Because we have been unable to find a path forward, we have been forced to take action to protect our business," John Zachry, CEO of the San Antonio, Texas-based company, said in a statement on Tuesday.
Zachry Holdings said it faced cost challenges over a change order and billings schedule, and it engaged in negotiations with Golden Pass LNG for additional funding without success, according to its filing in U.S. Bankruptcy Court for the Southern District of Texas.
Zachry's share of the project was valued at $5.8 billion.
Prior to April 2024, Zachry said it was incurring weekly expenses of $30 million to $40 million for payroll, vendor payments, equipment and other costs, but was receiving approximately $70 million per month from Golden Pass LNG.
“In March of this year, Golden Pass began direct-paying vendors, and clawed back much of those funds from advance progress payments due to Zachry,” the filing said.
In April, Golden Pass stopped the progress payments altogether.
On May 8, Golden Pass notified Zachry of default of its engineering, procurement and construction contract, citing, among other factors, Zachry’s inability to pay subcontractors and vendors promptly, the court filing showed.
Zachry that same day received a notice of default from another Golden Pass contractor, Chiyoda International, the company said. Unable to reach an agreement with Golden Pass, Zachry said it had no choice but to file for Chapter 11 protection.
Golden Pass LNG had warned earlier this month of possible impacts on construction of the first three trains of the project, which was designed to produce up to 18 million metric tons per annum of LNG. The project is one of two large LNG export plants that had been expected to expand U.S. exports in the next 12 months.
The United States is the largest exporter of LNG.
(Reporting by Curtis Williams and Sabrina Valle in Houston and Dietrich Knauth in New YorkEditing by Chizu Nomiyama, Gary McWilliams and Matthew Lewis)
This is a shocker.