News focus: INEOS shuts down Grangemouth, UK, refinery and petrochemical complex

18 October 2013 09:33  [Source: ICB]

The company will make a decision on whether to reopen the petrochemical complex during an ongoing labour dispute

The Grangemouth, UK, oil refinery and petrochemicals complex is to remain shut down until 22 October at the earliest while employees consider reform proposals submitted by owner INEOS, the Switzerland-based chemicals producer said. The entire site will remain closed while employees review proposals submitted by INEOS on 16 October regarding the future of the complex.

Conversations with trade union Unite finished on the morning of 16 October. Unite said it has called off a strike planned for 20 October, but the chemicals and refining units at the site had already been taken off line, and will remain down, INEOS said.


 Ratcliffe demanded an apology, said Unite

The company’s conversations about Grangemouth would take place with the site workforce and with INEOS shareholders, with both groups contacted on 17 October, said INEOS.

According to a source familiar with the situation, the proposals submitted to the workforce relate to the survival plan launched by the company in late September.

The proposals include pension reforms and the need to secure investment to develop a new gas terminal to bring in cheaper shale-derived feedstock from the US. The September survival plan also includes plant closures and job losses. The Grangemouth workforce would have the weekend to consider the proposals, INEOS said, and an answer is expected on Monday 21 October.

“A decision is going to be made on Tuesday on whether the plant is going to re-open or remain shut,” the source said.

Even in the event of a full accord being reached by the deadline, it would still likely take several weeks for all plant units to be brought back fully online, according to an INEOS spokesperson, who said that it had taken more than three weeks to bring the plant back online after a strike in 2008.

Unite said on 16 October it had proposed working towards a solution to the plant’s issues under the auspices of the Advisory, Conciliation and Arbitration Service, with the immediate cancellation of the strike and the guarantee of no strikes during the negotiations on the table.

However INEOS walked away from the talks, which Unite claimed was due to CEO Jim Ratcliffe instructing his management representatives to demand an apology in his behalf, Unite said.

“At 5:00 [GMT] ACAS representatives informed us that we could not conclude an agreement to take to our members because a list of fresh demands were placed upon us and because ‘Jim wants an apology’ and that this was ‘a deal-breaker’. I have never came across anything like this in over thirty years of employment relations and it is utterly reprehensible,” Unite Scottish secretary Pat Rafferty said on 16 October. INEOS retorted that the industrial action had further weakened a loss-making site, and has said in recent months that the site would close by 2017 regardless of the current issues if it cannot be made more competitive with cheaper feedstocks and a reduction of the pension burden.

“Grangemouth is financially distressed. The industrial action called by Unite the Union has inflicted significant further damage on the company,” the company said in a statement.

The closure of INEOS’s butadiene (BD) unit at Grangemouth, and subsequent force majeure declaration has not yet had a significant impact on at least one customer served by the site, sources said on 17 October.

INEOS’ BD unit, which has the capacity to produce 65,000 tonnes/year, started to ramp down on 12 October alongside the rest of the units at the petrochemical complex in anticipation of strike action. “For the time being we are still running,” a BD consumer said on 17 October. “We can run until the end of this week for sure. But other than that we don’t know.”

The consumer said it had been able to import alternative BD supplies but the uncertainty of the situation was hanging over them.

BD supply in Europe had been tightening in recent weeks because of planned turnarounds, light feed cracking and demand from Asia. Sources said a lengthy outage in Grangemouth would obviously affect the ability to source further alternative supply. Other European BD suppliers said they had received extra enquiries and requests from contractual consumers for additional volumes. Two said they were already “sold out”.

Supplies of 99% industrial grade ethanol could tighten following the shutdown of INEOS’ Grangemouth petrochemical and refinery operations, sources said on 16 October. “All of this is driving customers to look for new suppliers. They want to increase the number of suppliers they have for back-up,” one source said.

“If we have a shutdown for a long period, we will see huge price increases due to tightness and shortages. However, we will likely see some importation after a couple of months to balance the market,” the source said.

“People are realising it’s not as easy as they thought to get alternative supplies,” another source said.

“We buy alcohols from them. We’ll probably have to go to [another company] who’d likely put the prices up,” one buyer said.

Additional reporting by Sarah Trinder and Nel Weddle

By: Tom Brown
+44 208 652 3214

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