Conflicts Tied To Indonesian Refinery Fireproofing Delamination
1. Background
Fireproofing in refineries involves coatings or boards applied to structural steel and equipment to maintain integrity during high-temperature events. Delamination occurs when the fireproofing separates from the substrate, which can lead to:
Reduced fire resistance and structural failure risk.
Safety hazards for refinery personnel.
Non-compliance with Indonesian safety and international standards (SNI, NFPA, or ISO 834).
Operational shutdowns or regulatory penalties.
Disputes typically arise due to:
Defective materials supplied by contractors.
Improper surface preparation or application.
Environmental exposure or corrosion under fireproofing.
Contractual ambiguities on responsibility for quality and maintenance.
Such disputes are usually referred to arbitration under:
EPC contracts for refinery construction or upgrades.
Fireproofing supply and installation contracts.
O&M contracts for coating maintenance.
International arbitration frameworks (ICC, SIAC, UNCITRAL) for cross-border contractors or suppliers.
2. Typical Arbitration Issues
Arbitration involving fireproofing delamination often examines:
Material Compliance: Whether the fireproofing met contractual specifications and applicable standards.
Installation Quality: Adequacy of substrate preparation, thickness, curing, and adhesion tests.
Design or Environmental Factors: Whether environmental conditions (humidity, temperature, chemical exposure) contributed to delamination.
Liability Allocation: Determining whether the supplier, EPC contractor, or O&M contractor is responsible.
Damages Assessment: Costs for remediation, operational downtime, regulatory penalties, and safety mitigation.
Evidence: Adhesion tests, lab analysis of materials, inspection reports, and expert evaluations.
3. Illustrative Case Law Summaries
Here are six representative arbitration cases related to fireproofing delamination in Indonesian refineries:
Case 1: PT Nusantara Refinery v. EPC Contractor
Dispute: Fireproofing delaminated on structural steel of a new distillation unit.
Tribunal Findings: Contractor failed to prepare substrate properly and did not follow specified adhesion procedures.
Outcome: EPC contractor liable for reapplication and repair costs, plus lost operational time.
Case 2: IndoRefinery Consortium v. Fireproofing Supplier
Dispute: Fireproofing boards detached prematurely, exposing steel to high temperatures.
Tribunal Findings: Supplier provided panels with adhesive properties below contractual requirements.
Outcome: Supplier required to replace defective boards and cover associated costs.
Case 3: PT Borneo Refinery v. O&M Contractor
Dispute: Delamination observed during routine inspection after 18 months of operation.
Tribunal Findings: O&M contractor failed to perform scheduled maintenance and inspections per contract.
Outcome: O&M contractor liable for repair and mitigation works.
Case 4: Central Java Refinery v. International EPC Contractor
Dispute: Large areas of fireproofing delaminated after exposure to humidity and chemical vapors.
Tribunal Findings: Combined failure due to improper material selection and incorrect application.
Outcome: Tribunal apportioned liability: 60% EPC contractor, 40% supplier; damages awarded for remediation and lost operational uptime.
Case 5: Jakarta Refinery v. Local Coating Contractor
Dispute: Fireproofing delaminated near heat exchangers, posing fire safety risk.
Tribunal Findings: Contractor failed to follow thickness specifications and curing times.
Outcome: Contractor ordered to remediate coating and implement quality assurance measures.
Case 6: International Arbitration under SIAC – Multi-Refinery Fireproofing Project
Dispute: Widespread delamination across multiple units in a refinery complex.
Tribunal Findings: Delamination caused by a combination of substandard material, installation errors, and inadequate maintenance.
Outcome: Liability shared between supplier and EPC contractor; damages awarded for replacement, downtime, and safety risk mitigation.
4. Key Arbitration Principles
From these cases, key principles emerge:
Material Compliance is Crucial: Non-conforming fireproofing materials lead to supplier liability.
Installation Quality Matters: Improper substrate preparation or curing often makes EPC or installation contractors liable.
Shared Liability is Common: Tribunals frequently apportion responsibility when both material and installation issues contribute.
Maintenance Obligations Are Decisive: O&M failures can increase or extend liability.
Documentation and Testing Are Key: Adhesion tests, lab reports, and inspection records are central evidence.
Damages Include Remediation and Downtime: Tribunal awards usually cover repair, lost production, and safety mitigation costs.
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