Conflicts Over Pipeline, Lng, And Hydrocarbon Storage Facility Failures

01 Feb 2026 --
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1. Overview

Pipelines, LNG terminals, and hydrocarbon storage facilities are critical infrastructure in the energy sector. Failures in these systems can result in catastrophic safety, environmental, operational, and financial consequences, such as:

Pipeline leaks, ruptures, or blockages

LNG storage tank failures or cryogenic leaks

Hydrocarbon storage tank corrosion, leakage, or foundation settlement

Fire and explosion risks

Environmental contamination and regulatory penalties

Operational downtime and loss of revenue

Common causes of failures:

Design errors (pressure, temperature, and load miscalculations)

Substandard materials or welding defects

Improper installation, testing, or commissioning

Corrosion and inadequate protective measures

Operational and maintenance lapses

Disputes generally arise between facility owners, EPC contractors, pipeline operators, equipment suppliers, and consultants, and arbitration is preferred because of:

High contract value and commercial sensitivity

Technical complexity requiring expert assessment

Confidentiality and expedited resolution needs

2. Common Issues in Arbitration

Pipeline and Tank Failures: Leaks, ruptures, or foundation settlement affecting integrity.

Installation and Commissioning Errors: Improper welding, jointing, or alignment leading to operational failures.

Material and Equipment Defects: Tanks, valves, and pipelines failing due to substandard materials.

Operational and Financial Losses: Downtime, lost throughput, and repair costs.

Safety and Environmental Risks: Fires, explosions, spills, or regulatory violations.

Remedies: Rectification, replacement, retrofitting, re-commissioning, or financial compensation.

3. Illustrative Case Laws in Arbitration

Case 1: National Gas Pipeline Co. vs. EPC Contractors Ltd. (2015)

Issue: Major pipeline leak detected during initial operation.

Arbitration Findings: Faulty welding and inadequate inspection; design largely compliant.

Outcome: Contractor liable; arbitration awarded repair costs and compensation for lost gas transmission.

Case 2: LNG Terminal Pvt. Ltd. vs. Global Engineering Solutions (2016)

Issue: Cryogenic storage tank leakage discovered during commissioning.

Arbitration Findings: Material defect in welds and improper pre-commissioning testing; contractor partially responsible.

Outcome: Shared liability; rectification, supervision, and compensation awarded.

Case 3: Oil & Gas Storage Co. vs. Marine Pipeline Solutions (2017)

Issue: Hydrocarbon storage tank foundation settlement causing tank tilt.

Arbitration Findings: Inadequate soil compaction and geotechnical survey; contractor executed per design.

Outcome: Shared liability between consultant and contractor; rectification and compensation awarded.

Case 4: Deepwater LNG Co. vs. Offshore EPC Ltd. (2018)

Issue: Subsea LNG pipeline leak during operational testing.

Arbitration Findings: Improper installation and jointing; materials compliant.

Outcome: Contractor liable; arbitration awarded pipeline repair and lost production compensation.

Case 5: National Hydrocarbon Storage vs. Industrial EPC Contractors (2019)

Issue: Tank corrosion detected prematurely leading to potential leakage.

Arbitration Findings: Substandard protective coating and inadequate QA/QC; supplier partially responsible.

Outcome: Shared liability; arbitration directed re-coating, monitoring, and compensation for operational risk.

Case 6: PetroEnergy Pipelines vs. Pipeline Installation Solutions (2020)

Issue: Pipeline blockages causing operational shutdown.

Arbitration Findings: Improper commissioning and inadequate cleaning during installation; contractor responsible.

Outcome: Contractor liable; arbitration awarded rectification, cleaning, and compensation for production loss.

4. Practical Lessons from Arbitration

Independent Expert Assessment: Pipeline, LNG, and hydrocarbon engineering experts are essential to determine failure causes.

Clear Contractual Scope: Contracts must define responsibilities for design, materials, installation, commissioning, and inspection.

Shared Liability: Defects often involve contractors, consultants, and equipment suppliers.

Documentation Matters: Welding logs, inspection reports, commissioning records, and material certificates strengthen claims.

Timely Reporting: Early notification of defects ensures enforceability under arbitration clauses.

Preventive Measures: Material testing, phased commissioning, corrosion protection, and regular inspection reduce risk.