Petronet LNG Limited faces Rs 625.42 crore claims in arbitration

Petronet LNG faces vessel-owner claims of Rs 625.42 crore plus applicable taxes as at 30 September 2026 after disruption in the Middle East suspended three dedicated liquefied natural gas vessels from 2 March 2026. It has made no provision, contests liability under its time-charter agreements and says the owners have begun arbitration.

Why are vessel owners claiming Rs 625.42 crore from Petronet LNG?

The owners are claiming Rs 625.42 crore plus applicable taxes and associated costs linked to the suspension of three vessels, compared with Rs 89.30 crore at 31 March 2026. The claim rose by Rs 536.12 crore over the six months to 30 September 2026 while the vessels remained largely out of operation.

Petronet LNG has long-term time-charter agreements for Disha, Raahi and Aseem with India LNG Transport Company (No. 1) Limited, India LNG Transport Company (No. 2) Limited and India LNG Transport Company (No. 3) Limited, respectively. The vessels are dedicated to transporting liquefied natural gas, or LNG, to India under the company’s supply arrangements.

The claim amount is disclosed separately from Petronet LNG’s reported liabilities of Rs 5,836.14 crore at 30 September 2026. The filing does not quantify applicable taxes, individual owners’ claims, or the share of the aggregate amount attributable to each vessel.

What caused the three LNG vessels to stop operating?

The three vessels were totally suspended from 2 March 2026 because armed conflict and related hostilities that began in the Middle East on 28 February 2026 disrupted maritime navigation through the Strait of Hormuz and LNG loading operations. One vessel operated for approximately seven days in June 2026, the sole exception disclosed by Petronet LNG.

Petronet LNG said force majeure conditions began in March 2026 and continued through the quarter ended 30 September 2026. The company has a long-term sale and purchase agreement with QatarEnergy LNG S (2) for 7.50 million metric tonnes per annum of LNG on a free-on-board basis from Qstar, alongside corresponding long-term gas sale and purchase agreements with customers in India.

QatarEnergy LNG S (2) delivered a few LNG cargoes during the September 2026 quarter through alternate voyage charters on a best-effort basis, according to the filing. Those deliveries occurred while force majeure conditions continued, but the disclosure does not say that they restored normal operations of Disha, Raahi and Aseem.

The supply disruption coincided with lower revenue from operations in the September 2026 quarter. Petronet LNG recorded revenue from operations of Rs 7,200.35 crore, compared with Rs 11,009.13 crore a year earlier, while profit after tax was Rs 1,235.40 crore versus Rs 805.75 crore. The filing does not attribute either change specifically to the vessel suspensions.

Has Petronet LNG set aside money for the vessel claims?

Petronet LNG has not recognised a provision for the Rs 625.42 crore claims because, based on legal advice, management considers them not tenable under the relevant provisions of the time-charter agreements. The independent auditor highlighted this treatment in its limited review dated 2 November 2026 and did not modify its conclusion.

The absence of a provision means the claim has not been recognised as a provision in the standalone results for the period ended 30 September 2026. Petronet LNG reported current provisions of Rs 122.56 crore and non-current provisions of Rs 125.39 crore at that date, but the filing does not identify either balance as covering the vessel-owner claims.

Petronet LNG’s position is based on its interpretation of the contracts and legal advice, rather than a disclosed determination of the dispute’s merits. The auditor said the ultimate arbitration outcome and any resulting financial impact cannot presently be determined, leaving the matter unresolved in the reported results.

This treatment differs from the provision recorded against use-or-pay, or UoP, receivables. At 30 September 2026, Petronet LNG had provided Rs 230.72 crore against gross UoP dues of Rs 408.23 crore, resulting in net UoP dues of Rs 177.51 crore. The vessel claim has no equivalent provision in this filing.

What does the arbitration mean for Petronet LNG’s disclosures?

Arbitration has been initiated by the vessel owners to enforce their claims, and Petronet LNG is contesting the proceedings. The filing gives no hearing date, timetable, tribunal details, settlement process or estimated financial result as of 2 November 2026.

The claims concern the three vessels operating under their respective time-charter agreements, while Petronet LNG reports one operating segment, Natural Gas Business. The company said its primary business is the import and processing of LNG, and it has not separately reported shipping revenue, costs or profit.

Petronet LNG had cash and cash equivalents of Rs 2,238.37 crore at 30 September 2026, up from Rs 1,858.93 crore at 31 March 2026. Net cash generated from operating activities for the half year was Rs 2,914.37 crore, compared with Rs 1,815.56 crore in the corresponding 2025 period, although these figures do not establish any eventual arbitration cost.

Total equity stood at Rs 23,637.78 crore at 30 September 2026, compared with Rs 21,719.66 crore at 31 March 2026. The filing does not state whether insurance recoveries, counterclaims, contractual remedies or additional vessel costs could apply to the dispute.

Conclusion

The vessel dispute is a material unresolved contingent matter for Petronet LNG because claims increased from Rs 89.30 crore at 31 March 2026 to Rs 625.42 crore plus applicable taxes six months later. The rise followed the interruption of operations of Disha, Raahi and Aseem amid disruption to Strait of Hormuz navigation and regional LNG loading.

The next disclosed uncertainty is the arbitration, for which Petronet LNG says the outcome and financial impact cannot presently be determined. Subsequent results will show whether force majeure conditions, which continued through 30 September 2026, change, whether the dedicated vessels resume operations, and whether management revises its no-provision assessment.