Examination of Witnesses (Questions 1-19)
MR JIM
MOWATT, MR
RUSSELL GRAY
AND MR
STEPHEN DEANS
13 JULY 2004
Q1 Chairman: Good afternoon, gentlemen.
Can I welcome you to this Scottish Affairs Select Committee? You
will see Members coming and going. There is a lot of activity
in the House today. We have invited you here this afternoon to
discuss the possible implications for BP Grangemouth of the company's
plans for its petrochemicals business, about which the trade unions
representing the plant's employees have expressed major concerns.
There will be an opportunity at the end of our questions for you
to make any further statement that you think might be necessary,
but before BP's announcement of 27 April had you had any discussions
with the management about the company's plans?
Mr Gray: No, there had been no
discussions whatsoever.
Q2 Mr MacDougall: Recognising what you
said in the letter of 10 May, have you had a response from BP
Grangemouth and, if you did, what was the response? Was it encouraging?
Mr Gray: The response did not
answer any of the questions in any detail that were asked, but
we did get a response.
Q3 Mr MacDougall: You indicated in the
letter that industrial relations had been first class. Do you
think therefore that BP came to its decision to sell off its olefins
and derivatives division for solely commercial reasons rather
than the history of industrial unrest at the plant?
Mr Gray: It was not industrial
because in terms of industrial relations we have probably the
best industrial relations in the whole of the UK. We have had
one industrial action in 30 years. We have an excellent track
record in industrial relations.
Q4 Mr MacDougall: You have had a few
problems and you have dealt with them very well?
Mr Gray: Yes.
Q5 Mr MacDougall: Currently, Grangemouth
is an integrated site with both an oil refinery and the chemical
plant.
Mr Gray: That is correct.
Q6 Mr MacDougall: How would the site
operate if the chemical plant was sold off? Would there be two
separate sites for the two separate businesses? What do you envisage
would be the situation?
Mr Gray: We have asked that question
and the response is that the company would see it as it is—an
integrated site—which would beg the question why take what
we have and change it? To give you the picture, it is the only
site in the world that has three businesses on one site. It is
a unique site. To divide that back up goes against what BP has
been telling us for the last 10 years which is that the only way
Grangemouth could make money was to totally integrate the site.
Q7 Mr MacDougall: What you are basically
saying is that breaking up the site would cause bigger problems
rather than solve problems?
Mr Gray: Absolutely.
Q8 Chairman: Do you consider that there
still is an economic case for maintaining an integrated site?
Mr Mowatt: Yes. The situation
at Grangemouth has been for the last decade, although there has
not been any industrial unrest, that there has been an exchange
of handbags. The company derecognised ourselves, Amicus and the
GMB 10 years ago and that was part of an industrial trend. It
was not specific to BP. We have been through a kind of synthetic,
consultative period and last year there was I think a recognition
of the first class relationship we developed with the company
on site. We were afforded recognition. We had two sets of employees
in two separate T&G branches. We had the oil branch and the
chemical branch, of which Russell and Steve are the leadership.
They were on different terms and conditions. I have said in my
document[1]
that being able to synthesise those two different industrial relations
models is akin to getting the Faculty of Advocates to join up
with the Law Society of Scotland. It was enormously difficult.
It was reckoned that this was the only way—I have quoted
BP in the documentation—for a sustainable future for the
complex. Suddenly, on 27 April, we are hit with this bombshell
that they wanted to disintegrate the site. Incidentally, I have
quoted The European Chemical News unfortunately albeit
from our competitor, Shell, who say, "If you want to compete
globally, you need an integrated site with a pipeline" and
that is the unique feature of the Grangemouth complex.
Q9 Ann McKechin: Do you believe that
the new company is going to be fully independent of BP or do you
think that it will be a subsidiary company in all but name?
Mr Mowatt: There is a list of
questions which we have given the company and they have not furnished
us with answers. Initially, the company will be within BP. It
will be independent within BP. Then it will be independent from
BP. My experience as a senior negotiator in energy and engineering
before moving to oil, chemicals and engineering construction is
no, I cannot see it. I think it is a financial artifice. We have
made this point in our documentation which we have given copies
of to the company. We think it is about rewarding shareholders.
It is not about the efficacy of the plant because engineering-wise
you would not disintegrate or split it and, secondly, it does
not take any cognisance of the people whom they employ and all
the communities which surround the plant. I think it is utterly
and clearly a reward for shareholders. Incidentally, it is not
a singular item either. If you read The Scottish Financial
Times, the same thing has happened in Marks and Spencer, so
it does not surprise me but it does disappoint me.
Q10 Ann McKechin: Given the strength
of your views, is it your understanding that BP's plans are final
or are you still hopeful that they may change their minds?
Mr Mowatt: At my level they sound
final.
Mr Gray: If you look at the whole
deal, it is for 24 sites throughout the world. 21 of these sites
are stand alone chemical sites and three are what we term integrated.
There is one in Germany, one in France and ourselves. We are the
only one that is integrated in the sense that the three businesses
are there. We see a different case. For us to survive integration
is the only way forward, as far as we can see it.
Q11 Ann McKechin: You are keen on an
exemption from the package rather than fighting over 24 sites?
Mr Gray: I do not think you can
fight over the 24 sites, but I think we have a great case for
Grangemouth.
Q12 David Hamilton: It was indicated
in some of the correspondence how many job losses there would
be in the area. Could you remind us just how many jobs depend
on Grangemouth both indirectly and directly?
Mr Deans: Directly, at the moment,
we employ about 1,500 people of which 500 are employed at the
refinery, 500 directly at chemicals and a further 500 with what
are known as shared services. Supporting that, there are possibly
double that from contractors employed on the site on a term contract
basis, but that could even be raised to a significantly higher
number when we have major engineering shutdowns. There is also
a large number of jobs attributed to the site from suppliers across
central Scotland.
Q13 David Hamilton: Could you give us
an indication of the number of suppliers who may be affected if
you do not have that?
Mr Mowatt: There is an element
of guesswork. We contacted both Edinburgh University and Heriot-Watt
University to interrogate their research. The numbers are so divergent
we did not put them in the document.
Chairman: I think they would be extremely
helpful.
Q14 David Hamilton: How do you think
selling off BP's petrochemical interests will affect employment
at Grangemouth?
Mr Mowatt: It will devastate it.
It will cause a Ravenscraig effect. Incidentally, in my preamble,
I made a comparison of what happened back in May with the Baglan
Bay Petrochemical plant in Wales. Because it was sited on the
west coast, it did not have a direct pipeline and therefore it
was a disadvantage to the east coast refineries. It was finally
closed on 31 March this year. At one time it employed 5,000 direct
BP employees. The place looks as if the Luftwaffe has just left
it.
Q15 David Hamilton: Might such a situation
lead to many experienced staff leaving and perhaps even joining
one of BP's or the new company's competitors in the area?
Mr Gray: We have a problem because
a number of people are voting with their feet. I have worked for
BP for 27 years and there is quite a lot of discontent amongst
some of the staff. They are leaving to go and work with competitors
offshore.
Q16 David Hamilton: Could I ask about
existing staff? Is it the case that eventually what might happen
is that the company might retain some of the existing staff only
if they agree to less favourable terms and conditions of employment?
Mr Mowatt: That is our fear about
Newco. I understand it is sometimes difficult with the jargon
but we have heard on the street that Newco is going to be called
AMOCO Chemicals. To be fair, AMOCO Chemicals enjoys a global reputation,
so although people talk about Newco essentially we believe it
is going to be AMOCO. I cannot think of one example, where there
has been a divestment, when the employer did not have an appetite
to attack the terms and conditions and the pension rights of those
that had been transferred across. We have been able to ring fence
occasionally. We did that with ICI. We had a four year moratorium
written into the contract of employment, which Steve and Russell
know about. It is called the Hanson Letter. That was the only
way we could protect people's terms and conditions, by making
an explicit, written term in the contract of employment.
Q17 David Hamilton: As somebody who used
to work in a hazardous industry, the mining industry, for 20 years,
one of the major problems we had was that we had redundancy agreements
with people of great experience who were leaving the industry.
Do you believe that that would have the effect of losing some
of your most experienced staff who leave the industry? New people
will come in who do not have the training, the knowledge, to replace
some of the vacant jobs? Is that a potential problem?
Q18 Mr Mowatt: There is a disconnect
and it is one on which we have an empathy with BP and other companies
with whom we negotiate. Often, people who have an ambition to
leave are the very people you want to keep because they have the
skills, the energy and maybe the mobility, young craftsmen who
have come up, taken an HND or an Open University degree and have
been very well trained. BP enjoys a global reputation for skills
acquisition, attitudes and aptitudes. Unfortunately, the people
they want to stay want to leave and sometimes the people they
want to leave want to stay. We have had to come up with an analogy.
The analogy which we have adopted in the T&G is that "no
one will have to walk the plank. If anybody is going ashore, they
will be piped ashore with dignity." The people who want to
go are usually the younger people who are going to add big value
in the longer term because they have been in BP for 10 years and
they are highly skilled.
Q19 David Hamilton: Is it your view that
once the chemical plant is sold off the oil refinery might eventually
be closed down?
Mr Gray: There is a big fear.
It is well known that five years ago when a barrel of oil was
at a $10 dollar challenge—I think it was called—BP
looked at selling the Refinery at Grangemouth and could not. Obviously,
the barrel is now $40 and it was a wise decision to keep it. Who
says it will be $40 for ever and a day? We do not know. If the
price were to come back down, who knows what would happen?
1 BP Press Release. Not printed. Back
| 
