Finance needed to avert Grangemouth petchems plant closure: INEOS

19 September 2013 13:47  [Source: ICIS news]

INEOSLONDON (ICIS)--Swiss-headquartered INEOS on Thursday confirmed it will close its Grangemouth petrochemical plant in the UK by 2017 unless it can stop the facility from losing money and obtain the necessary investment to secure shale gas feedstock supply.

Calum MacLean, INEOS chairman of Olefins and Polymers Europe, in an interview with local newspaper The Falkirk Herald, said the company has been facing losses in the region of £150m/year (€179m/year) over the last three years. This is due to a decline in North Sea petrochemical feedstocks and because the pension scheme is £200m in deficit, while pension costs are an unsustainable 65% of salary.

INEOS’ current contractual supply agreement for North Sea petrochemical feedstocks expires in 2017. The company is looking to source shale gas from the US to supplement the decline in gas from the North Sea which has led to the cracker running at only 50% capacity, Maclean said.

In the interview, he added that, to source shale gas from the US and get the cracker operating at 100%, INEOS would need a £150m investment to prepare the site and a further £200m to offset losses while a required new tanker facility was being built.

If the site continues to lose over £100m/year, Maclean admitted the petrochemical side of the business will not continue beyond 2017. However, if this investment was obtained, the future of the plant would be secured for the next 20 years, although this would need to be combined with a change in structure of the group's current pension scheme.

INEOS is already currently facing the threat of industrial action. On Friday 13 September, Unite, the UK’s biggest union, sent out ballots to workers at Petroineos’ 210,000 bbl/day Grangemouth refinery to vote on possible strikes.

Petroineos comprises trading and refining joint ventures between INEOS and Chinese state-owned PetroChina. In July 2011, PetroChina completed a $1bn purchase of a 50% stake in INEOS’ European refining operations.

Unite has decided to ballot over INEOS' decision to investigate allegations that a senior site union representative inappropriately used company resources and systems. A dispute also continues between workers and management over issues surrounding pension provisions, and claims that agency workers have been misused.

The ballots will be returned and counted after two weeks.

In response, INEOS said it was disappointed with Unite's decision to ballot its members at Grangemouth, adding it would not be intimidated by the union’s actions.

"INEOS has a fair and reasonable process for investigating this type of allegation. The company believes that this process should be allowed to proceed unhindered by interference from a trade union,” the company said.

At the time, INEOS added that, although it had invested over £1bn since taking over the site, the business continues to struggle and, with heavy cash losses, industrial action was neither wise nor sensible.

MacLean on 13 September said: “The Petrochemical business at Grangemouth is at a crossroads and we need to focus all our efforts on solving these problems. The current financial position is unsustainable and we need the unions to work with us to give the business a future, not constantly threaten industrial action.”

($1 = €0.74, £1 = €1.19)

By: Franco Capaldo
+44 (0)20 8652 3214

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