By Romel S. Gurky
PT Perusahaan Gas Negara Tbk (PGN), the Indonesian gas distribution giant listed on the IDX (PGAS), is currently embroiled in an arbitration dispute with Gunvor Singapore Pte Ltd. concerning a Master LNG Sales & Purchase Agreement (MSPA). The dispute stems from delayed LNG shipments, with Gunvor claiming US$74 million in damages, primarily due to PGN’s failure to meet delivery timelines.
The arbitration proceedings are being handled by the London Court of International Arbitration (LCIA). On January 20, 2025, the LCIA confirmed the formation of the arbitration tribunal, setting the stage for what could be a prolonged legal battle between the two companies. On February 17, 2025, Gunvor submitted its Statement of Case (SOC) to PGN’s legal representatives at Mayer Brown. This was followed by an online Case Management Conference (CMC) on February 20, 2025, where the LCIA granted PGN until March 31, 2025, to submit its Statement of Defense (SOD).
As of now, PGN is in the process of preparing its defense and remains confident that there has been no material impact on its financial health or business operations from the dispute.
“The company respects the ongoing legal process and continues to monitor the situation to ensure that there are no disruptions to the company’s operations and business activities,” PGN said in a statement on Wednesday, March 26.
Read also: PGN reports higher revenue and profit for 2024
This arbitration stems from PGN’s failure to deliver LNG cargoes as outlined in the contract with Gunvor. Under the terms of the MSPA, PGN was obligated to deliver eight LNG cargoes per year from January 2024 through December 2027. However, PGN missed the first two cargo deliveries and, as the situation developed, Gunvor rejected the third, fourth, and fifth shipments, citing alternative LNG sources.
PGN’s CEO, Arief Setiawan Handoko, explained in a recent hearing with the House of Representatives that Gunvor had contractual obligations to procure LNG exclusively from PGN and disclose the identities of their buyers—a disclosure that Gunvor has failed to provide.
In defense, PGN has indicated that they were ready to deliver the cargoes as per the contract, but Gunvor refused the shipments, opting instead to redirect the LNG to other markets like China and Korea. The shipments were initially intended for Japan, which PGN claims further strengthens its position in the dispute.
PGN has already set aside provisions of US$72.02 million in its financial report for September 2024 to cover the claims related to the LNG contract, a figure that matches the outstanding amount Gunvor is seeking in its legal action. The company had previously reserved US$68.54 million for the same contract in 2023.
Editing by Reiner Simanjuntak
