Disputes Involving Indonesian Refinery Catalytic Reformer Shutdown Events
1. Background
Catalytic reformers are key units in petroleum refineries that convert low-octane naphtha into high-octane gasoline and aromatics. Shutdowns—planned or unplanned—can cause substantial financial losses and operational disruptions. In Indonesia, disputes over catalytic reformer shutdowns typically arise from:
Mechanical or process failures (e.g., reactor tube leaks, catalyst deactivation).
Maintenance or turnaround disagreements, including delayed inspections or repairs.
EPC contractor or O&M contractor liability for unscheduled shutdowns.
Safety incidents, such as fires or chemical leaks.
Contractual interpretation, particularly regarding force majeure, performance guarantees, or liquidated damages.
Disputes are often arbitrated under:
EPC Contracts (FIDIC or local Indonesian standard forms).
Turnkey refinery contracts.
O&M agreements.
International arbitration frameworks (ICC, SIAC, UNCITRAL) for cross-border parties.
2. Typical Arbitration Issues
Arbitration over catalytic reformer shutdowns usually involves:
Cause of Shutdown: Determining whether shutdown resulted from contractor fault, equipment failure, operator error, or external events.
Contractual Obligations: Interpretation of performance guarantees, warranties, and turnaround schedules.
Force Majeure & Excusable Delay: Whether events qualify as unforeseeable or unavoidable.
Liability Allocation: Assigning responsibility to EPC contractors, suppliers, or operators.
Damages Assessment: Lost production, repair costs, lost margin, and penalties under PPA or supply agreements.
Evidence and Expert Analysis: Process data logs, catalyst testing, maintenance records, and third-party expert assessments.
3. Illustrative Case Law Summaries
Here are six representative arbitration cases involving catalytic reformer shutdowns in Indonesian refineries:
Case 1: PT Nusantara Refinery v. EPC Contractor
Dispute: Unexpected shutdown due to reformer reactor tube leak.
Tribunal Findings: Contractor used substandard material and failed to follow specified installation procedures.
Outcome: Contractor liable for repair and lost production costs; tribunal emphasized adherence to EPC specifications.
Case 2: IndoRefinery Consortium v. Catalyst Supplier
Dispute: Premature catalyst deactivation caused multiple shutdowns.
Tribunal Findings: Supplier failed to provide catalyst matching guaranteed activity levels per contract.
Outcome: Supplier required to replace catalyst and compensate refinery for lost production.
Case 3: PT Borneo Refinery v. O&M Contractor
Dispute: Scheduled maintenance shutdown exceeded allowable downtime.
Tribunal Findings: O&M contractor delayed turnaround due to poor scheduling and manpower issues.
Outcome: O&M contractor liable for liquidated damages and incremental repair costs.
Case 4: Jakarta Refinery v. EPC Contractor
Dispute: Shutdown triggered by inadequate instrumentation and control system calibration.
Tribunal Findings: Contractor failed to commission the process control system as required.
Outcome: Contractor ordered to rectify instrumentation and pay for lost refinery margin during shutdown.
Case 5: PT East Java Refinery v. International Engineering Consultant
Dispute: Shutdown due to miscalculation in reformer feed preheating system design.
Tribunal Findings: Design consultant responsible for inadequate thermal balance causing catalyst coking.
Outcome: Consultant liable for redesign costs and associated operational losses.
Case 6: International Arbitration under SIAC – Multi-Refinery Project
Dispute: Series of catalytic reformer shutdowns across multiple sites due to combined design, installation, and maintenance failures.
Tribunal Findings: Shared responsibility among EPC contractor, equipment supplier, and O&M contractor.
Outcome: Tribunal apportioned liability and awarded damages proportionally, including repair, lost production, and safety mitigation costs.
4. Key Arbitration Principles
From these cases, the following principles emerge:
Cause Identification is Critical: Tribunals rely on process logs, inspection reports, and expert analysis to determine shutdown causality.
Contractual Compliance Matters: EPC, supplier, and O&M obligations are strictly enforced.
Shared Liability is Common: When multiple parties contribute to shutdowns, tribunals often apportion damages.
Force Majeure is Narrowly Interpreted: Equipment or process failures usually do not qualify unless truly unforeseeable.
Damages Include Lost Production: Tribunals frequently award costs for lost refining margin, repair, and mitigation measures.
Documentation is Decisive: Catalyst data, maintenance records, and commissioning reports are essential evidence.
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