Examination of Witnesses (Questions 20-39)
MR JIM
MOWATT, MR
RUSSELL GRAY
AND MR
STEPHEN DEANS
13 JULY 2004
Q20 David Hamilton: The million dollar
question is what do you think the long term, ultimate interests
of BP are in relation to the Grangemouth plant and its Scottish
operations?
Mr Gray: We know for a fact that
BP have costed an exit strategy for Grangemouth. The effect that
would have in Scotland would be devastating.
Mr Mowatt: Grangemouth represents
just under 10% of the gross national product of Scotland. Integration
is a mechanism which Steve and Russell know the benefits of intimately.
A good example is "Flaring" where, to maximise the profits
in oil the chemicals business takes the hit. That cannot obtain
when you have two separate companies with two separate sets of
shareholders. The chemical company will have a fiduciary responsibility
to shareholders and will no longer take the hit. That puts the
refinery at a disadvantage and that is a concern we have. If we
take a Domesday picture, if the chemical side goes and the oil
refinery does not do terribly well, our fear is that the pipeline
will no longer flow to Grangemouth; it will flow into England.
That is coupled also we believe with the different tax regime.
Although I am the national official based in London, I understand
there is a different tax regime. There is a kind of hit on Scottish
enterprises because of the Scottish Executive. The company may
have an appetite to go into Hull and bypass Grangemouth entirely.
That is a prospect we believe the company has investigated. It
is one of the questions we would like the Scottish Affairs Committee
to ask about and seek consideration about.
Q21 David Hamilton: I get the feeling
that in many companies and many industries that I have seen over
the years there has been a cross-fertilization, a cross-subsidy
sometimes between the two organisations. What you seem to be emphasising
is that if we made that division it would be an unnatural division
and one that would have a direct effect.
Mr Mowatt: I wish I had said that.
Q22 Chairman: Your fear is that there
could be a regional pipeline that could feed straight into the
UK?
Mr Mowatt: Straight into England,
for oil and gas.
Q23 Chairman: And completely bypass Grangemouth?
Mr Mowatt: That would have an
impact not just on BP but at Syngenta, Avecia, Rohm and Haas.
That would be 20 companies in the Grangemouth strip. The only
reason they are there is BP. If you take out BP, why would they
be there?
Q24 Chairman: Try to give us an overview
of how many people are employed in those companies?
Mr Mowatt: 15,000 T&G members
alone. Amicus is a well established, big union across the strip.
GMB has a big presence.
Q25 Chairman: We are talking about possibly
in excess of 20,000 jobs in central Scotland?
Mr Mowatt: Yes, east central Scotland,
Stirlingshire.
Q26 Chairman: Plus the knock-on effect
of suppliers and their employees so everything in the Falkirk
and Grangemouth area is dependent on this plant?
Mr Mowatt: Yes. Every day the
amount of traffic going in and out of the strip and specifically
the complex is enormous. It is a logistical task for management,
the access and egress from the site. You are talking about a world
class facility. Rohm and Haas are world class. Syngenta is the
biggest agrochemical company in the world. Its main production
unit is Grangemouth and that is predicated on its proximity to
BP. If we want our economy and the manufacturing dimension of
our economy to flourish, we need to base that on clusters and
critical mass. That is why the German chemical industries were
concentrated. That is why we do so well in the north west. Teesside
is another excellent cluster. Once you take out Grangemouth, the
cluster evaporates.
Q27 Chairman: One of these clusters could
evaporate with this pipeline?
Mr Mowatt: That is my view.
Q28 Mr MacDougall: What you are saying
is that effectively that means the oil and petrochemical plants
in Scotland would no longer be required?
Mr Mowatt: Yes. They would be
serviced from England.
Q29 Mr MacDougall: The impact of that
would be that the industry would be closed down in Scotland?
Mr Mowatt: Yes.
Q30 Chairman: Where is this pipeline
planned from and to?
Mr Mowatt: Easington. There is
already a pipeline at Easington, of course.
Q31 Chairman: Are the plans well ahead
with this?
Mr Mowatt: I do not know.
Q32 David Hamilton: Is it Easington/Northumberland?
Mr Mowatt: Yes.
Q33 David Hamilton: Is it still the case
that Grangemouth is the biggest water consumer as an industrialist
in Scotland?
Mr Deans: Yes.
Q34 David Hamilton: Therefore, it would
have a direct effect on the Scottish water industry?
Mr Mowatt: Yes, and the shared
services between BP and them. We have worked very hard as a union
to afford the companies, with whom we negotiate, every economy
of scale. We have been in negotiations at BP, Syngenta and Avecia
to share water and effluent treatment so that everyone can reduce
their costs. That is why, if you take out BP, it is a domino effect.
Q35 Mr MacDougall: Basically, you are
saying it is not just in Scotland. Unless you are in the very
southern part of England, the whole system will be disrupted by
the proposals and, on top of that, valuable income into other
commodities like water services?
Mr Mowatt: You do not have to
refine oil and gas in Britain to serve British needs. You can
do that from Europe. That is our fear, that that is what Exxon
and Mobil are going to do. If Fawley goes down in Southampton,
they will do it from Europe. If you can bring it in from Azerbaijan,
you can bring it from County Durham.
Q36 Mr MacDougall: The impact that would
have would be much greater and go much further than Scotland?
Mr Mowatt: It is much, much greater
than simply the oil and chemical industry in central Scotland.
Our view is that 10% of the GDP of Scotland is based on the BP
Grangemouth complex.
Q37 Chairman: That is not counting the
knock-on effect to other companies?
Mr Mowatt: Exactly.
Q38 Chairman: Are we seeing a forerunner
to a complete change in the petrochemical industry?
Mr Mowatt: It is very competitive
globally. You only survive as a global player. The last time we
put in a review of the terms and conditions of employment of our
members, I wrote that what we want to do is have our members be
proud of the companies who employ them. They are not very proud
of BP just now.
Q39 Chairman: Gentlemen, we have exhausted
our questions to you but please take the opportunity if you wish
to make any additional remarks. We have a document from you and
that will be published with the transcript of this Committee today.
That will go into the public domain. Is there anything else that
you would like to add?
Mr Mowatt: Two very small points.
We have a culture in the British trade union movement that we
think, unlike the Oxford University Debating Society, a debate
should be about progress, not victory. We do not want an argument
with the company. We want to work in partnership with the company.
I hope we have demonstrated in our document that we believe in
change and we have embraced change. The best example of that in
British industrial relations is what has happened in BP Grangemouth.
Our difficulty is our members now operate in a fog of uncertainty.
We hope that you and your Committee will help lift that fog. We
have a number of questions which we would like you to consider,
if we can put them on the record. [2]The
final one is: how committed is BP to continue the pipeline into
Grangemouth, because we think that is the critical question.
Mr Gray: If you go back three
years, the Grangemouth site was losing money. Following the integration,
last year we made $200 million plus. The expectation is it will
go up to $500 million in the next 18 months. In April, I think
we made 13% return on capital employed. They said that we could
never hit that figure. If we are making $1 million a day when
the price is good with an expectation of $500 million, why would
a company want to give that up? If you split it up you will not
make that kind of money.
Chairman: Can I thank you very much indeed
for your attendance? It is greatly helpful to us when we look
at this issue. We are trying to highlight concerns about issues
without raising undue fears but we will have the management representative
before us shortly. Thank you once again for your evidence and
your document and for taking the time to come all the way to us
today.
2 See Ev 9 Back
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