Dispute over floating regasification vessel in Indonesia

Indonesia's Perusahaan Gas Negara aims to begin arbitration proceedings against the owner of the floating regasification vessel PGN FSRU Lampung, which is located offshore the south-east coast of Sumatra.

The vessel owner, Hoegh LNG Partners, said state-owned gas transmission company PGN had raised certain issues in relation to the operations and charter of the vessel in a letter dated 13 July 2021.

In a further letter dated 27 July 2021, PGN stated that it would begin arbitration to declare the charter null and void, and/or to terminate the charter and/or seek damages, Hoegh LNG Partners said.

"Based on an initial legal review, the partnership believes the charterer's position is without merit," Hoegh LNG Partners added.

The dispute over the PGN FSRU Lampung has disrupted Hoegh LNG Partners' efforts related to the refinancing of the vessel.

The refinancing of the credit facility linked to the vessel had been scheduled to close by the end of the second quarter of 2021, but cannot be completed because PGN has not consented to and countersigned certain customary documents related to the new credit facility.

"The partnership needs to conserve its internally generated cash flows to resolve issues related to the ongoing refinancing of the PGN FSRU Lampung credit facility," Hoegh LNG Partners said.

The FSRU vessel is leased to PGN on a 20-year plus five or 10 years' charter.

The vessel was delivered in May 2014 from Hyundai Heavy Industries, and has gas storage capacity of 170,000 cubic metres of LNG and maximum gas send-out capacity of 360 million cubic feet per day.

It is located offshore Lampung province on the island of Sumatra.