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Grangemouth closure: Union may make concessions

Ineos intends to shut down the petrochemical plant, with the loss of 800 jobs. Picture: PA

Ineos intends to shut down the petrochemical plant, with the loss of 800 jobs. Picture: PA


  • by SCOTT MACNAB AND RORY REYNOLDS
 

UNION bosses may make some concessions to Ineos, the owners of the Grangemouth oil refinery and petrochemical plant, in a last-ditch attempt to stop the closure of the facility and avoid the loss of 800 jobs.

According to reports, Unite may accept a limited number of proposals from Ineos, the owners of Scotland’s biggest industrial powerhouse, after it announced its intention yesterday to axe the facility.

The announcement also raised fears for the future Scotland’s only oil refinery, as the company suggested that it might not be able to survive on the Grangemouth site on its own.

The news sparked calls from politicians in both parliaments for further talks between both sides of the dispute to save the petrochemical plant,

But last night it emerged that Unite union officials may be ready to accept some of the conditions laid down by the owners on pay and pensions in the hope the decision to shut the plant will be reversed.

However, there were serious doubts as to whether Ineos would accept any last-minute offer after making their decision to close the facility, which they say is losing £10 million a month.

The announcement of the closure saw the firm accused of “industrial vandalism”, amid concerns that the decision will devastate Scotland’s fragile economic recovery.

Stunned workers were told their jobs would go as the bitter dispute between management and trade unions came to a head yesterday morning.

First Minister Alex Salmond said the closure must not be allowed to happen and has stepped up the hunt for a new buyer as a “matter of urgency”.

The Scottish and Westminster governments have offered multi-million-pound funding packages in an effort to save the plant and called for both sides to keep talking.

There are growing fears that the entire complex could be facing closure, threatening the jobs of about 3,000 permanent staff and contract workers at Grangemouth and up to 10,000 posts in the wider local economy which rely on the complex.

Ineos site manager at Grangemouth, Gordon Grant, said: “What we’re facing now is a stand-alone refinery, losing all of this synergy, of the products, the gases, but also the synergy of the services and the utilities.

“The financial burden will be much greater going forward on that single refinery.

“We are less than 24 hours into this decision. We are very clear that we don’t know all the answers, that [the viability of the refinery] is one of the answers we don’t know.”

Workers were given the grim news at a meeting with Ineos chairman Calum MacLean. The decision to close was blamed on the rejection of a new deal on reduced terms and conditions aimed at saving the loss-making facility.

Staff left the meeting expressing shock at the move.

One worker said afterwards: “I feel sick. It’s gone. There’s no livelihoods left and we don’t even know if we’re going to get redundancy out of it. I hope they’re happy with themselves.”

Although the oil refinery has not been closed down along with the petrochemical plant, Ineos said a decision to restart production at this site, which has been shut for the past week following the threat of imminent industrial action, will depend on that threat being lifted.

The firm also wants staff to commit to the controversial changes to pay and conditions which were rejected by about 680 of the 1,350 permanent employees last week. It says the loss-making complex needs £300m of investment. Liquidators will be appointed within the next few days to start running down the plant.

The entire site is worth about £1 billion a year to the Scottish economy and accounts for approximately 2 per cent of the country’s GDP.

Ineos director Tom Crotty confirmed that the closure of the petrochemical plant was “unhelpful” for the refinery.

The petrochemical plant effectively buys the by-products from the oil refining process at the refinery, to make chemicals which are then used in plastics and pharmaceuticals.

Mr Crotty said: “It doesn’t help the refinery – the refinery is in a worse financial position than it was before.”

Ineos majority shareholder Jim Ratcliffe also warned at the weekend that the refinery could struggle to survive if the petrochemical plant closed.

Mr Salmond insisted last night that the petrochemical plant must be saved. “The closure of any part of the Grangemouth complex would be a most enormous blow to the Scottish economy,” he said. “We can’t really countenance that loss. I’m not accepting that Grangemouth is going to close – we can’t accept that. It’s too important.”

The Scottish Government has been talking to potential buyers for the plant. “We will now be actively exploring this as the main option as a matter of urgency,” added Mr Salmond.

But any new owner would need to invest £300m to upgrade the facilities and deal with a looming £200m pensions black hole.

Mr MacLean said: “If Mr Salmond wants to continue this business he will have somebody who is prepared to take £50m of losses, prepared to put in £300m of capital in the business in order to build the infrastructure to receive the feedstocks, and he will have to have someone who has feedstock to bring in. I can’t think of any combination he would [find] able to do that.

“He may choose to put someone in front of us. We’ll try anything we can do, but I don’t see where that is coming from.”

Scottish Secretary Alistair Carmichael also said the plant must not be allowed to close.

“If the owner is not going to be Ineos, then it must be someone else,” he said. “This is too essential a site for our economy here in Scotland to let it slip away without exhausting every avenue we can.”

Westminster’s Department of Business, Innovation and Skills will also help seek a new buyer.

The closure decision followed the passing of a deadline on Monday of a “survival” plan put to employees, asking them to accept a pay freeze, the closure of the final salary pension scheme and changes to other terms and conditions.

Mr MacLean said: “The employees were offered a chance to secure substantial new investment in the company, preserve their jobs and keep their salaries. Sadly this will no longer be the case.”

Unite Scottish secretary Pat Rafferty said workers were “devastated”, adding: “We have made further proposals in a last-ditch effort to stave off these catastrophic job losses, which we believe is tantamount to economic and industrial vandalism.

“Make no mistake – one man is holding this workforce and this country to ransom and that man is Jim Ratcliffe.

“Unite cannot do any more. The ball is now in the court of Jim Ratcliffe and the respective governments in Edinburgh and Westminster, and we await their responses.”

Business leaders last night warned of the wider impact on the economy.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: “This major shock threatens the recovery of Scotland’s economy. The priority now is for key players to ensure a solution is reached which prioritises Scotland’s economic recovery. We need contingency plans in place immediately to ensure a continuous supply of fuel throughout Scotland.”

David Watt, executive director of the Institute of Directors Scotland, said: “I’m disappointed it’s come to this and hope that a solution can be found to keep the petrochemical plant open.

“The closure of the Grangemouth plant has major ramifications for the Scottish economy. It’s important that plants like this are close to centres of industrial activity, otherwise it becomes too expensive for companies to do business.”

Coalition rules out nationalising Grangemouth plant

The UK Government has ruled out the prospect of the plant being takeninto public hands.

Prime Minister David Cameron’s official spokesman also urged both parties to try to find a way to “continue their dialogue.”

He added: “The right thing to do is for the Government to offer its help and support in that process.

“Even at this stage we hope that a way forward could be found.”

Asked whether there was a possibility of the plant being nationalised, the spokesman replied: “No.”

Energy and Climate Change Secretary Edward Davey voiced his disappointment at the decision.

“It is regrettable that both parties have not managed to negotiate a fair and equitable settlement that delivers a viable business model for the plant,” he said.

“Even at this late stage, I urge Ineos to continue dialogue with the workforce, and Government will offer help and support with this.

“Ineos have informed us that the refinery will stay open and the management wish to restart full operations as soon as possible. We stand ready to help with discussions between the management and the union to ensure this can happen.

“Fuel supplies continue to be delivered as usual and there is no current risk of disruption to supplies.”

Asked what contingency arrangements had been made in case petrol supplies were halted, the spokesman said: “Fuel supplies are continuing to be delivered, so that’s the actual situation.

“Of course, Government has contingency plans for a range of scenarios, as you would expect.”

Q&A: Ineos says there is no realistic prospect of future profit

Q What is the problem behind petrochemical plant at Grangemouth?

A The oil from the Forties network in the North Sea has less of the ethane content the site’s petrochemical plant uses, meaning it has been operating at less than 60 per cent capacity. To make up this shortfall, Ineos had planned to import shale gas from the US, where a boom in the fuel has driven down prices.

To do this, though, part of its “survival plan” would need government loan guarantees and large cuts in costs, focused on the pay and pensions of the joint workforce of 1,370.

Q In its current condition, could Grangemouth have a future?

A Though its assets may have value, Ineos recently reduced its valuation of them from nearly £400 million to zero, saying there is no realistic prospect of future profit.

Q Could it be nationalised?

A Having already involved itself in attempting the find a buyer for the site, the Scottish government hasn’t ruled out the possibility of taking over the plant itself.

Q What is the future for the refinery?

A Its finances have previously been boosted by selling feedstock to the petrochemical plant. Removing that outlet means it will have to flare off excess gas, effectively burning off income and raising issues about excessive emissions.

The refinery could look at shipping its by-products, adding to costs, and it would be in effective competition with US shipments, which Ineos says are available at a quarter of the European price.

Staff reveal shock at decision

Staff at the Grangemouth site today spoke of their shock at the closure of the petrochemical plant.

One petrochemical worker leaving the briefing from management told the Scotsman he was “gutted” at the decision and expected to be out of work by Christmas.

Asked about the impact on the surrunding town, he said: “They will be gutted. People have mortgages to pay. The businesses, snack vans, support companies - all of these will be gone.”

One refinery worker claimed management had told workers at the meeting it was “your fault” over their failure to accept reduced terms and conditions.

But John Hodgeson, an engineer at the petrochemical, said he still believed that the firm is bluffing.

“We’ve seen this before from the company - the petrochemical plant will never close. It’s too big to close down. I’ve worked with Ineos before and Jim Ratcliffe has done this before - teling workers their jobs will go if they don’t agree to new conditions, but eventually keeping them on.”

He added that he expected there will be a “new deal on the table” in the coming days.

Refinery closure would not affect pump prices - AA

Pump prices should not be affected if the Grangemouth refinery joins the adjacent petrochemical plant in closing, Britain’s biggest motoring group said today.

The AA said that following last year’s closure of the Coryton refinery in Essex, which supplied 20 per cent of fuel in south east England, fuel prices in London actually fell. It is still trying to find out why.

Spokesman Luke Bosdet said it would take the closure of several refineries in close succession to push up prices, as happened at the beginning of last year when a number of plants shut in North America and Europe.

He said Grangemouth might continue to operate as a fuel depot if its refinery closed, with supplies being brought in by sea - as happened at Coryton.

Mr Bosdet said: “On its own, the closure of the Grangemouth refinery would not create any price rises in the short term. I would not expect prices in Scotland to shoot up.”

READ MORE

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Grangemouth analysis: Hope lies with politicians

Grangemouth: How downfall began with bar-room brawl

 

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