Memorandum submitted to the Committee
by T&G
1. PREAMBLE
Representing the vast bulk of the employees
within the British Petroleum (hereinafter referred to as "BP")
Complex, the Signatory Trade Unions led by the Transport &
General Workers' Union (hereinafter referred to as "the T&G")
has a legitimate vested interest in the future of the Complex
in terms of direct BP employees, contractors and extramural workers.
This does not embarrass us; rather it motivates us in terms of
winning in the workplace and enhancing the communities within
which our Members are employed.
Our experience informs us that no one is immune
to the vicissitudes of change. Those include the T&G and the
rest of the Trade Union and Labour movement; rather than complain,
criticise or bleat, we have an enviable record for trumpeting
the need for change in partnership with employers. Indeed, our
General Secretary, Tony Woodley, has courageously launched his
"Strategy for Change", which demands a seismic change
within our own organisation. Based on our experiences as negotiators
in industries which have undergone fundamental metamorphoses,
we do have an appreciation of the fears and apprehensions which
change inevitably surfaces.
My own experience as Chief Negotiator in the
Oil Chemical and Engineering Construction sectors informs me that
generally individuals are not fearful of change; they are, however,
fearful of uncertainty.
For this is a human condition. For after all,
in October 2004, one million young adults will leave home and
take up higher education. Geographically, emotionally, physically
and culturally, this must be the biggest quantum leap in change
which any individual would normally encounter. Yet there are one
million volunteers for that change. Perhaps their enthusiasm for
change—obviously tinged with some apprehension is because
they have some certainty about what the future holds for
them.
In BP, the situation confronting our Members
whilst not utterly comparable has some similarities. Our Agreements
in BP where changes in technology, procedures, behaviours and
remuneration is taken for granted and woven into our everyday
activity, there is a general fear of uncertainty with regard to
job security, employment prospects, mergers and acquisitions and
closures. Paradoxically, it is the Union which provides an element
of reassurance and stability throughout these processes, even
upheavals, in BP.
Our track record in Grangemouth is enviable.
We have negotiated a convoluted path through consultation, collective
bargaining, derecognition, synthetic consultation and only last
year, the re-establishment of collective bargaining. The integration
of the Oil Refining and Petrochemicals would be akin to the synthesis
of the Law Society of Scotland and the Faculty of Advocates, and
we take full credit for this. We seized the challenges presented
by BP Senior Management and galvanised them into an opportunity
which was ambitious for the Company.
2. INTRODUCTION
When exiting the Isopropyl Alcohol (IPA) business
globally through the closure of its production facility at Baglan
Bay in South Wales in March this year, the reason given by BP
was that the plan could no longer compete with the other feedstock—integrated
sites. Thirty years ago, Baglan Bay was one of Europe's largest
Petrochemical sites, employing 2,500 directly and 5,000 contractors.
Their disadvantage was geographical, with North Sea oil putting
west coast locations at risk. Our concerns have a resonance with
our Welsh colleagues' experience. You need a direct pipeline and
an integrated site to compete on a global market. We remain
unconvinced by BP protestations about the efficacy of their proposal
to split the Grangemouth Complex—to disintegrate.
3. EFFICACY VERSUS
RETURNS
The Petrochemicals industry is a global one
in which success depends on innovation to meet the challenges
of competition and sustainability. To quote Jane van der Eijk,
the Executive Vice President of Shell Chemicals.
Winners in this industry are those who focus
on scale, integration, flexibility, costs and sustainability.
The best plans are world-scale and integrated with upstream oil
and gas production and downstream chemicals. They optimise resource
and energy use while minimising logistic movements and environmental
impacts. [3]
Exactly the strategy which was so vigorously
pursued by BP in Grangemouth until their Annual General Meeting
in April this year.
Why the Damascene "volte-face"?
Because of the BP shareholders and their urgent
demand to maximise returns on the capital; for certainly it is
not about the BP employees and the Stirlingshire communities in
which BP operates. For, predictably, there has been no consultation
about this metamorphosis. This American decision was a "fait
accompli", which has the hallmark of the financier—surprise.
Today this tactic is utterly unacceptable; in
Human Resources (HR) terms such a fundamental breach of confidence
and trust would warrant a P45 at director level; in the world
of finance it solicits plaudits.
BP in 2004 reported a first quarter profit of
£2.64 billion—a rise of 17% on the comparable period
in 2003. Sales for the three months ending 31 March 2004 were
£37.8 billion, a 9% increase on the first quarter of 2003.
These announcements were coupled to the decision that BP will
be selling half of its Chemical (Olefins and Derivatives [O&D])
business "to focus on its more profitable areas".
Why?
Lord Browne, BP's Chief Executive, gave the
game away on 27 April 2004, when he declared:
"We are on track against our targets of
investing for growth, growing the dividend and utilising surplus
cash to fund a significant level of share buy backs."
BP said the assets of the Chemicals businesses
being sold were worth around £4 billion, which represents
half a year's net profits for the Company.
"This is good news" said Peter Hitchens
of brokerage, Cheuvreux. "The cash will be channelled into
the share-back programme."
4. BP AT THE
GRANGEMOUTH COMPLEX
Grangemouth is a unique site in the BP Group.
It is an integrated site with Refinery, Chemical plant
and an Oil and Gas Exploration pipeline from the North Sea, which
is linked physically and organisationally.
Until very recently—27 April 2004—the
Company was adamant that the only way to preserve the business
was to maintain the integrated status and retain one Complex.
From 5,000 BP personnel in the 1970s, there
are 1,450 employees today across the three businesses:
— 500 in Chemicals (O&D).
— 400 in Oils and Exploration.
— 500 in "Shared Services".
Through increased flexibility with an integrated
workforce, 1,000 jobs were shed within the last two years as part
of "Securing a Future for Grangemouth".
The Company announced, and paraded, the new
Chief Executive Officer, Ralph Alexander, formerly of American
Chemicals giant, AMOCO—we believe that the preferred name
for the until-now labelled "Newco" will be "AMOCO
Chemicals".
5. CONCERNS
5.1 Optimisation
By splitting the Complex—to disintegrate—we
have deep worries about being able to optimise the skills,
kit and procedures on the Grangemouth Complex.
5.2 Health, Safety and the Environment Issues
(HSE)
Currently recovering from a series of catastrophic
incidents involving the local communities HSE issues will be needlessly
compromised by the creation of at least two companies and two
different systems. So, too, for Human Resources. Presently, together
the Signatory Unions and the Grangemouth Management have achieved
alignment with HSE and HR with a clear focus on people—employees,
contractors and the community.
We are convinced that this will be jeopardised
by recreating, at least, two systems of accountability, management
and operations.
5.3 Employment Terms
Quite reasonably, for we do represent a legitimate
constituency—our Members—we fear for the continuance
of our Members' terms and conditions of employment, which are
in the upper quartile of earnings in Central Scotland.
5.4 Future of Plants
Once hived off, we have worries about the plant
continuance in Chemicals, with specific fears around our Polymer
plants.
Please note that BP has already been looking
into purchasing Shells' Mossmorran plant in order to utilise the
Ethylene export facility. BP could bypass the Grangemouth Chemical
plants altogether, if this was to develop.
5.5 Refinery: the Future
Following a split, fears for the continuance
of the Refinery plant have been stoked. BP attempted to sell the
Refinery approximately five years ago, but was thwarted by potential
purchasers' apprehensions about the costs of bringing the Grangemouth
Refinery plant up to global standards.
5.6 Jobs
Of course, any Trade Union harbours concerns
about the potential for job reductions as part of a parallel cost-cutting
programme. Robin McGill, Director of the Grangemouth Complex is
on record as saying:
"In the past three years employees in the
whole of the Grangemouth site, including the Petrochemicals businesses,
have been through a period of radical reconstructing intended
to give the site a sustainable future."
He means integration.
The workforce at Grangemouth has witnessed successive
reviews of operations in recent years and inevitably there has
been casualties. Now there is a feeling among BP employees that
their reward for their co-operations is to be transferred out
of BP.
The T&G's experience of employment transfers
is that, all too often, workers' terms of employment are adversely
impacted upon.
BP's declaration to sell its Chemicals businesses,
possibly through an Initial Public Offering (IPO) fuels fears
that, having been sold on the American stock market, "AMOCO
Chemicals" becomes an American company. Again, our experience
informs us that such a transfer has detrimental effects on British
employees. They feel—and are—much more vulnerable
to the whims of overseas senior managers and the vagaries of a
foreign economy.
Specifically for our 500 Members employed in
"Shared Services", no guarantees have been issued about
keeping such arrangements in-house—neither BP nor Newco
(AMOCO).
Neither have assurances been given on current
job numbers.
Nor pensions.
6. CHANGE
We've demonstrated admirably that the workforce
can embrace and exploit change, seeing it as a challenge and an
opportunity. There are few things more ghastly than uncertainty.
BP globally has created an industrial haar of uncertainty around
Grangemouth.
7. UNCERTAINTY
Understandably, the Signatory Unions have an
ambition to evaporate that fog of uncertainty enveloping the Grangemouth
Complex. To that end, we have tabled many questions and requests
for information. The response from BP has been obfuscation, glib
and unsatisfactory, for example:
| We asked | "Can you provide us with proof of the business case for Newco at Grangemouth?"
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| BP responded | "The business case for Newco is a global one with BP's decision to exit the Olefins and Derivatives business worldwide. As Grangemouth's Petrochemicals assets are all O&D, it means that Grangemouth becomes part of the deal."
|
| |
And so on; with numerous other questions which we have tabled.
Worryingly, no answers have been forthcoming. Such vacuous responses
do not inspire confidence.
8. BP OPTIONS FOR
GRANGEMOUTH AND
THE SIGNATORY
UNION'S
PREFERENCES
Create a "BP Scotland", operating the Company as
an integrated individual entity, with the three business streams
incorporated.
Absorb the Grangemouth plants into the Refining and Marketing
segment, as BP has already achieved in Hull in England; then operate
the Grangemouth site as one business predicated on BP's previous
"6 Point Plan" for efficiency and profitability.
Newco own Chemical plants on site with BP operating the plants.
Newco operate Chemicals plants on site with "Shared
Services" owned by BP.
Newco own and operate Chemicals plants on site with "Shared
Services" owned by Newco.
Newco own whole of present Grangemouth complex.
Mr Jim Mowatt
National Secretary T&G
Chemical, Oil, Rubber Manufacturing, Pharmaceutical & Engineering
Construction Trade Group
July 2004
Questions submitted to the Committee by T&G for
consideration
Questions for the Scottish Affairs Committee to Consider
Management, it appears, had an appetite to operate the site
in a broadly similar fashion (the status quo), why then divide
the complex and its:
— Information Technology etc, etc.
into separately accountable companies?
At present the site can be operated to maximise the profitability
of the explorations and refinery markets. This can detrimentally
impact on the chemical plants projects (FLARING for instance).
Will this symbiotic—and very profitable—relationship
continue when NEWCO owns the petrochemicals plants?
If so, how?
And would that arrangement be legal as NEWCO will have a
fiduciary responsibility to its own shareholders?
Are we witnessing the initial manoeuvring of an exit strategy
from Scotland by BP? Has the company costed such an exit strategy?
How committed is BP to continue the pipeline into Grangemouth?
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European Chemical News 15-21 March 2004. Back
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