Examination of Witnesses (Questions 40-60)
MR IAIN
CONN
13 JULY 2004
Q40 Chairman: Can I thank you for your
attendance here today? You will have heard the evidence from the
trade unions. Would you like to make an opening statement perhaps
responding to some of the points that they made?
Mr Conn: If it would please the
Chair, I would like to make an opening statement because I think
it may begin to clarify some of the points raised by the union
representatives, for which BP is extremely grateful. I would like
first of all to thank the union representatives for their presence
here and for the nature of the relationship at Grangemouth. It
is correctly reflected that we have had a very good relationship
over many years at the site. I would also like to thank them for
the points raised and BP fully understands the concerns raised.
I hope that today, in so far as I am able, I will be able to provide
some clarification. I am managing director of the BP Group and
formerly I was in charge of the petrochemical company, so I am
familiar with these matters. There are two points that I would
like to raise at the beginning. While the interest of the Committee
is about Grangemouth in Scotland, obviously that cannot be seen
in isolation, as the union rightly pointed out. This has been
a global intent involving 24 sites. Secondly, much is still to
be decided, although it is frustrating quite a number of matters
have still to be decided including how the plant and site will
operate, what terms and conditions are right for our employees
there. Some of these things are bound by confidentiality and obviously
negotiations with our members. The first thing I would say on
the decision is that this intent to sell our olefins and derivatives
business is a global one. It will involve creating a company employing
currently about 7,500 people in 24 locations around the world,
producing 20 million tonnes of petrochemical product with a turnover
of about $20 billion. To help people with that, that will be a
company that would probably be ranked, if it were in the UK, in
the top 50 companies in Britain. It will be ranked in the top
250 companies in the world and it will be larger than Rolls Royce.
I just want to give you a feel for the size of company that we
are talking about and therefore why it is that the business cannot
only revolve around Grangemouth. However, Grangemouth is a very
important part of it, producing about three million tonnes of
this 20 million tonne production, and will be a very large part
of the business in Europe and indeed will be the centre of operations
for this company in the UK. The strategic rationale for this decision
is that there are four big things happening around the world in
the chemical industry right now. The first one is that the markets
are no longer local. They have all become linked up globally.
Product moves around and prices are no longer set locally. The
second thing is that a lot of investment is going into the Middle
East, particularly Saudi Arabia, where there is very cheap feedstock
for chemicals. That production is coming into Europe and is undermining
the margins in Europe. The third thing is that the pound and the
euro have been so strong that they are damaging today the competitiveness
of the petrochemical industry in Europe. Fourthly, China is producing
large volumes of finished product and bringing them into Europe
and the United States and taking volume away from the business.
While we have done many things to improve the competitiveness
of the petrochemical industry in Europe, the threats globally
are very considerable. This means that the industry in Europe
is particularly under pressure. Petrochemicals in BP have returned
about 10% over the last four or five years. Olefins and derivatives
have returned about 6%. For those of you who understand this,
that is below the cost of capital for BP. It is like putting your
money into a bank or worse. Yet, despite that, we have one of
the best petrochemical portfolios in olefins and derivatives in
the world. The key question is how do you create a competitive
future for that business so that it can compete and therefore
secure jobs and secure its future? Grangemouth over the last five
years, the petrochemical company, has absorbed $400 million of
cash. It has not produced any. Its returns are approximately 2%.
I just want to give you a sense of that. We have many other plants
around the world that are losing money, so Grangemouth is not
by any means the least competitive. Faced with this situation,
clearly further improvement is required. Our transformation of
Grangemouth over the last few years, as rightly was pointed out,
has taken Grangemouth from a loss making position which was very
threatening to a profitable position. However, we need to further
improve it. The final piece of the equation was to understand
that even once we have improved Grangemouth, and if we improve
the rest of the world, those businesses will not compete for capital
within BP for growth; whereas they would compete for capital outside.
I was quite involved in this decision. In order to make the petrochemical
company more competitive and to allow it to have access to growth
investment, it needs to be outside BP. That was the decision we
made. The intent is to IPO[4]
this business, the best chance for it to compete in its sector
and therefore to create a sustainable, competitive position and
therefore jobs. A couple of things were raised in terms of the
implications of this. It is true that we have said that we are
going to base the headquarters of this company in the United States.
That is not to say that most of its operations will be in the
United States. In fact, they will be in Europe. Grangemouth will
be one of the most important parts of the company. It is also
important to recognise that the European asset base will be critical
to this company, as will Grangemouth. In answer to the specific
question raised—is this new company an artifice? Is it some
sort of fake subsidiary of BP?—initially, until the first
stage of the IPO which is intended at the end of next year, this
will be a 100% owned part of BP. After the initial tranch of the
IPO, it will be something like 80% owned by BP. That would be
my guess. Then there will be subsequent tranches from sale of
the interests to shareholders. Eventually, BP will be the minority
owner and could even not own it at all. That is our intention.
Therefore, it will be completely independent of BP ultimately
and it will have different shareholders to BP. This is not an
artifice at all. BP will have influence over it completely until
it is partially sold and thereafter BP will only be a shareholder,
albeit a large one. Lastly, I would like to address three other
points that the members raised. Grangemouth is not unique. Our
Gelsenkirchen site in Germany is also fed by a crude oil pipeline,
also has a refinery there and a petrochemical plant there. Our
plant in Chocolat Bayou in the Gulf Coast in the United States
is also pipeline fed, is also integrated with the refinery and
has a petrochemical plant. I do not think it is fair to say that
Grangemouth is unique. In terms of what I think are extremely
sensible questions about integration, it is true that our industry
has pursued integration because of the severe competitive pressure
that we have been under. I would only make two points. Firstly,
the engineering that makes hydrocarbons flow from one part of
the plant to another is not going to be dramatically changed if
you have different owners because it makes no sense. If it makes
sense now, it will make sense in the future. The second thing
is, if we have managed to achieve better efficiency through shared
services at the site, which commercially logical competitor would
want to undo that? I am very hopeful—and indeed it is BP's
intent—to try and maintain as much if not all of the competitiveness
of Grangemouth as we go about this commercial separation. The
last point that I would like to address that was raised is this:
I am not sure where this fear about a pipeline system that would
bypass Grangemouth and come to England arose from but I know nothing
about it. Easington is a place where a North Sea pipeline is planned
to come into. It would be prohibitively expensive to extend the
pipeline from Grangemouth to England. Secondly, there is no reason
why you would because there is an export terminal at Hound Point
that exports most of the crude oil. The only thing you would need
to do is to create a gas stabilisation plant there and the pipeline
will continue to run. I think it is somewhat alarmist to say that
Scotland is about to lose its oil, its pipeline and its export
system. That is highly unlikely. It is true that Grangemouth plant
has an advantage by being connected to the pipeline. So are many
other plants. Grangemouth has one disadvantage and that is its
location. It has an advantage being connected to the North Sea;
it has a disadvantage in that most of its products have to be
taken across to Europe to be sold. Grangemouth has improved significantly
in the last few years. The plans that we put in place with our
colleagues have, in my view, created a sustainable future for
Grangemouth and I believe that sustainable future can be achieved
irrespective of whether the refinery and the petrochemical plant
are owned by different companies. Thank you.
Q41 Chairman: Thank you. We do understand
that you may be restricted in some of your answers by commercial
considerations and we would hope that you could write to us in
confidence about anything that may come up where that is the case.
You are saying to us that you have no plans for a pipeline into
Easington at this point?
Mr Conn: I did not say that. I
said I believe that there are industry plans to introduce a pipeline
into Easington. That is completely separate from any notion of
extending the Forties pipeline system into England, of which I
have absolutely no knowledge and I do not believe it has any substance.
Q42 Chairman: Your announcement of 27
April means, I take it, that BP is withdrawing entirely from its
petrochemical industry?
Mr Conn: Not entirely. The petrochemical
company that BP possesses has three pieces to it. It has a business
that is involved in the production of aromatics and acetyls. We
are going to keep that. That is going to be absorbed into our
refining and marketing company. That is the part of the company
that is involved in Hull, which was the other big site that we
still had operating in the UK. The second part is a fabrics and
fibres business which makes carpet backing. That is being sold
and will be sold this year. The third part is the main part, about
60% of the petrochemical company, the olefins and derivatives
business, which we do intend to separate from BP itself but by
an IPO. We are not entirely exiting the petrochemical business.
Q43 Chairman: If you are not, would that
mean that you would create the bizarre situation whereby BP is
deliberately forming a rival company?
Mr Conn: BP is forming a separate
petrochemical company, yes, which we believe will be a major competitor
in the world stage. It is not a rival company because the bits
that BP are keeping are not involved in the same markets as olefins
and derivatives.
Q44 Chairman: Can you tell us something
about why BP came to the decision to sell off its olefins and
derivatives division?
Mr Conn: As I outlined in my opening
statement, the decision that we intend to sell our olefins and
derivatives business by IPO is based upon the competitiveness
of that portfolio; the fact that within BP it does not compete
for investment money for growth in the same way as the rest of
BP and therefore, as an owner, we had to recognise that ultimately
we were probably limiting its future potential. When you take
that, combined with the changes in the global chemical markets,
it was our intention that the best future for olefins and derivatives
would be ultimately outside BP. Those are the reasons in a nutshell
why we have decided to sell.
Q45 Ann McKechin: In your press release
of 27 April,[5]
you make a great deal about the strength of the O and D sub-segment,
its high quality, its global network of sites, its good technology
and fine range of products. It begs the question why BP and its
shareholders, because that is who ultimately you have to account
to, wish to divest themselves of such a seemingly valuable commodity,
given the fact that BP is a global, international company.
Mr Conn: Thank you for that. I
think it is a very reasonable question to ask. First, the typical
returns that BP delivers are in the 15 to 20% range. The typical
returns that olefins and derivatives have been delivering are
about between 2 and 10%. It is the lowest returning portfolio
in BP today. Our shareholders, in seeking for us to invest in
the highest profitable opportunities—which obviously you
would expect us to do—means that the lowest returning parts
of our portfolio will never get the investment capital to grow.
However, for other shareholders who want to invest in commodity
chemicals where returns of that nature are considered to be good,
especially if you can improve them just a little bit, they will
get the investment to grow. Therefore, it is not in the ultimate
interests of the business, nor of BP's shareholders, for BP to
retain this portfolio and that is the reason.
Q46 Ann McKechin: Has that been something
which has happened cumulatively over a number of years? You have
had an olefins and derivatives division at Grangemouth for a very
long time.
Mr Conn: We have. First of all,
let me comment on the global portfolio. The global olefins and
derivatives portfolio has not made money in excess of BP's cost
of capital for the last 10 years. I think that is quite important
to state. Effectively what that means is that the olefins and
derivatives portfolio has not created value for our shareholders
of any magnitude in the last decade. Grangemouth was in a loss
making situation in the petrochemical business and I am very pleased
to say that the petrochemical part of Grangemouth is now making
a small amount of money, but it is still quite challenged in terms
of its returns.
Q47 Ann McKechin: We have always talked
about the fact that Grangemouth is currently an integrated site
with both an oil refinery and the chemical plant. How do you see
the site operating if the chemical plant is sold off, not just
transferred to an internal company, but when you start to sell
the shares? Would there be two totally separate sites for the
two separate businesses?
Mr Conn: A very good and very
reasonable question. This is one that has been raised and asked
of me and my colleagues in Germany, France and the United States
because everyone wants to know how would you run this. Obviously,
the big questions are around physical integration, the other aspects
of integration that we have enjoyed and how do you run it effectively.
I would make a point of history. It was quite a short time ago
in the history of Grangemouth. I think BP has been involved in
Grangemouth since about 1923, the time of Scottish Oils. Even
in 1994, from memory, we had a fence line running down the middle
of the site so it was only in recent history it was totally physically
separated. We have made huge advances in integration, both in
terms of the way our workforces cooperate, maintenance systems
working as one, shared services, commercial integration of the
plant. Now, having made it more competitive but facing these global
challenges, what would you do if there were different ownership
on the site? We have many sites that have different ownerships
on them. We have lots of people living within our fence lines
operating businesses on our sites, so it has precedents all over
the world. Secondly, it is a site by site decision and we have
not made it yet so any answers I give you would be conjecture.
It is entirely feasible commercially that one party operates the
entire site on behalf of both. That happens on some sites. It
is also feasible that the shared services that both parts of the
site enjoy could be negotiated to be continued to be supplied
from one place to both companies. It is also true that the physical
flows of the oil on the site are unlikely to go anywhere else
because there is not anywhere else for them to go. Having plumbed
it together, it is highly likely that they will flow in the same
way. It will simply be a matter of price and commercial negotiations.
My sense is that you can easily find emotional reasons why this
separation will be impossible. There are as many, if not more,
logical reasons why this separation will not only be feasible
but will be advantageous to the workforce at the site, because
I think it will be part of a more competitive chemical company.
It has more chance of having growth investment than it does under
BP. Most of these beneficial effects will be maintained and, if
we do this carefully—I want to stress that point—it
is BP's intent to think about this extremely carefully and take
the whole of the next year to plan this carefully so that we can
create benefits for both BP and this new company where the competitiveness
of these big sites is maintained. I am confident that we will
be able to do that with the cooperation of our colleagues in the
workforce.
Q48 Ann McKechin: You have spoken about
the best case scenario if you disintegrate the two sites on the
basis of maximum cooperation in terms of service provision and
using what already exists in the site in terms of shared services
and maintenance, but if you divest yourself of sufficient shares
in the company which you are proposing to create presumably the
worst case scenario is that either the company who effectively
owns it decides to close it down and you lose the benefit of shared
costs of maintenance, which has a knock-on effect for the rest
of the site; or alternatively you end up with an aggressive competitor
owning the company who decides not to cooperate and works against
cooperation because they do not see that as in their commercial
interests. How do you protect the welfare of the site and the
workers in that case?
Mr Conn: Firstly, your point is
exactly right. Once we sell part of the company into public offering,
BP will be a significant shareholder at that stage, but it will
not have total control over the company. It is also clearly true
that once BP does not own the company at all the company is entirely
free to pursue its own goals. I cannot speak for the future. I
do not think it is right for me to talk about whether or not that
company could conceivably close down a plant. It is always possible
and conceivable. Grangemouth however is competitive in aggregate
and some parts of it are very new. We have made a lot of big investments
in Grangemouth and it has some of the leading polyethylene and
polypropylene technology. It has some very advanced cracking capacity
there. I do not think it is likely that a buyer would suddenly
say, "I do not like this site any more. I am going to close
it down" because I immediately have to ask the question why
did they agree to buy it in the first place. The second thing
I think is unlikely is that any owner would suddenly decide
to compete aggressively against the refinery because it is the
only source of the feedstock for that plant. It is unlikely that
that plant could ever operate independently of the refinery. Not
only that: it gets a large part of its advantage from being connected
to the pipeline system through the refinery. The scenarios you
paint are technically feasible, but are highly improbable, so
much so that I think they are unlikely to occur.
Q49 Ann McKechin: Perhaps I could finally
ask you whether you consider there is still an economic case for
maintaining integrated sites in general, and the big ones in particular
that you have a problem with?
Mr Conn: This issue of integration
and of disintegration applies to certainly four major sites around
the world; they are not all in Europe, there is one in the United
States and three in Europe, and then there are some other minor
sites where it applies as well. I do not think this is a signal
that integration is no longer fashionable. Integrated value of
co-operation and sharing I think will still be something that
is central in the future, because none of these competitors can
afford not to. I think what is different is that the primary driver
of the strategy for holding the assets is no longer enough to
make that the primary goal; the primary goal for these enterprises
should be to compete in the transformation of the chemical industry,
and I think the chair rightly said this is heralding a new change
in the chemical industry. I think it is, and I believe it is simply
stating that integration value is no longer the primary driver,
but I think it will always be a strong secondary driver.
Chairman: Thank you. John MacDougall.
Q50 Mr MacDougall: Going with change,
change brings fear, people do not like change obviously and the
plans are going to bring about quite a lot of change. One of the
questions I would like to ask you is about the rights of employees,
during that change; do people continue with the same employment
when the new company is set up, is there a breakdown, do people
lose jobs through that? Can you give us some indication of what
the process will involve?
Mr Conn: The biggest issues that
are on people's minds at the moment; we have dealt with a couple
of them—or at least I have tried to. Clearly, integration
value is one of them, another one is clearly around employment,
another one is the leadership of the company and another one is
where is the company going to be based. We have decided it is
going to be based out of Chicago; in terms of the leadership of
the company, my successor has been named; his leadership team
has been named, and I have tried to address the issue of integration.
So we are left now with jobs and terms and conditions. The first
thing I would say by way of opening comments, we have not decided
how to set up the employment structure of the company or how we
are going to staff up the company or, indeed, the terms and conditions
of the company. However, I would make a second point: creating
a company in which you are going to give people terms and conditions
which are dramatically worse than they are today, is not likely
to give you much chance of either having a motivated workforce
or, indeed, given that many of the employees around the world
are protected by regulations and legislation like TUPE, it is
unlikely that we are going to be able to make massive shifts in
this anyway. So, again, you can get very worried about it or you
can say actually, provided BP acts responsibly, this will be something
that we can discuss. What is the process going forward? We are
going to enter into discussions, obviously fully representing
ourselves in co-determination and co-operative practice with our
representative unions and Works Councils—that is something
BP is committed to—we are clearly going to be bound by all
regulations and we want to enter into a situation where, as quickly
as possible, the terms and conditions of this new company are
established and people understand what is happening with key things
such as pensions and benefits. BP always will stand by the accrued
pension benefits that people have accrued to the date of transfer
into the new company. The day that the company IPO's it will become
a separate company, so it is true that legally the employer may
well change and we still have then to negotiate the individual
terms and conditions at all of the sites around the world. In
terms of job losses, we do not have a target, we do not have a
plan, so I cannot tell you that there are numbers here. I have
been on the record publicly, however, of saying that it is my
view—and this is a personal view because the plans have
not been laid out yet—that the majority of affected jobs
are likely to be in the commercial centres of the company rather
than in the operating sites, but there may be some impact in the
operating sites as we design the new company. That is about all
I can say at the moment.
Q51 Mr MacDougall: If I can pursue that
now by asking you another couple of questions, basically you have
invested a lot of money in your staff, you have trained them,
they are there handling their jobs and the business, they are
an asset to you. Given the existing employees, surely the incentive
should be to create an environment of confidence in terms of where
they stand and therefore not lose faith in the company, so they
will work with you and not work for a competitor, therefore bringing
out the benefits of them being there and giving you the best chance
of maintaining the profits that you need to do what you do as
a company. Principally, where do you stand on that sort of ethos,
do you believe you should try your best to maintain the staff
you have got and the money you have invested in them, or do you
accept that giving the wrong message may actually discourage them
from staying with you?
Mr Conn: I can be very clear on
that. One of the most important assets of this new company, if
not the most important asset, is its human capital. We have got
outstanding people in this company, thousands and thousands of
people. This is not a single site sell-off, this is the creation
of a viable company, ranked probably in the top 250 or 500 companies
in the world. This is not a small deal, so we are embarking upon
something BP has never done before, which is to create a viable
competitor in the chemical industry that we believe is big enough
to reshape parts of that industry. This could actually be good
for Scotland, not bad for Scotland, in the sense that it is going
to have the UK centre of that company in southern Scotland. I
believe wholeheartedly that we need to encourage people that the
future in this company is not a bad one. We have evidence already
in the senior ranks of the company—where, clearly, the employees
are not bound by union negotiations or tariffs—that we have
people wanting to join the company who we do not want to join
the company. The current leader of the company, Ralph Alexander,
is an extremely capable businessman, very charismatic and he is
passionate about the future of this company; his leadership team,
which has just been announced, consists of faces that are well-known
and respected by our workforce. I believe, subject to carrying
out conversations in the right way with those who represent our
employees and with our employees themselves, and provided we conduct
ourselves in a manner which is based on principle and sound policy,
that we will attract people to stay with this company and it will
create a viable future for its employees.
Chairman: Thank you, John. David.
Q52 David Hamilton: I do not know where
to start. The headquarters are going to be in the USA—I
can still remember BP being British Petroleum, so maybe I am hankering
back a bit. I realise from your opening remarks that BP ranks
in the 200 top companies in the world, but my real fear about
that—and I have heard these comments before—is that
you then get the following comment that Scotland is on the periphery
of Europe and it therefore may not matter, and when you take a
global view—you indicated about Saudi Arabia, China, which
are places which are cheaper, you would not like to go there because
they are both quite unstable in their different ways, so you want
to go for a stable background. You also, quite rightly, point
out that there are two other sites, one in Germany and one in
the United States, that are similar to that in Grangemouth, but
I assume they will suffer from the same problems as the UK in
terms of the pound is strong, the euro is strong, the dollar is
strong, so we will get to a point when the new company is set
up that Grangemouth will be the centre, I think you said, of the
UK operation. The question is what size is your UK operation going
to be?
Mr Conn: In fact, Grangemouth
may well be all of the UK operations, as it is at the moment for
this company. The fear about a US-based company and so on—I
understand the concern, but here are a couple of points I would
make. The first point: why have we chosen to put the company into
the United States? It is because—I hate to say this—shareholders
in the United States seem to value chemical companies more than
shareholders do in Europe. That is a shame, but it is a fact,
and they pay more for the chemical companies, give greater earnings
multiples, therefore by putting it in the United States we are
likely to attract more chance of more capital and a stronger balance
sheet than if it was based in Europe, which can only be good for
the competitiveness of the company and ultimately for job security.
Your point about Scotland on the periphery of Europe—like
you, I do not want to move Scotland, even if I could and I fortunately
cannot—I do not think we will ever change the fact that
Scotland is on the periphery of Europe in certain senses in terms
of distance from markets, and I do not think we will ever change
the fact that, as a result, Grangemouth has to export its product.
On the other side of that, Grangemouth has some of the newest
plant, the best technology and is connected to the Forties pipeline
system. The future of the North Sea, while there are always questions
and it is definitely entering into a different phase of its life,
still has tens of billions of barrels of oil equivalent to be
recovered and there are already talks going on in the industry
about linking the Forties pipeline system to Norwegian Natural
Gas Liquids because it is not only Grangemouth that depends on
that, it is also Mossmorran. I believe very strongly that, provided
people are commercially rational, the future of this piece of
infrastructure connected to the North Sea is viable for a considerable
period of time, and although Grangemouth will not be the centre
of this new company, it was certainly not the centre of BP and
I believe it will get more attention for investment in this new
company than it would have done in BP in terms of growth and investment.
Q53 David Hamilton: Mr Conn, you have
painted a very good picture on the world stage; however, when
we talk in terms of the workforce itself I have seen enough organisations
and major companies who have lost many of their skilled workforce,
not the management skills and so on, but the skilled workforce
on the site, and then when they have lost that workforce—which
creates its own problems—then they find that the second
argument comes in says "We cannot do this because we do not
have the workforce to do that". Is there not a possibility
that by down-sizing the organisation as it is progressing and
not retaining the really skilled workforce within the Grangemouth
complex, you end up in a position several years from now saying
you cannot keep on going because of the lack of skilled knowledge
that you have within the site? That is a danger because I have
seen it happen in many other organisations.
Mr Conn: I think it is always
a danger. If you make bad judgments and you make bad judgments
in your relationship with the workforce and you make bad judgments
of who you need and the skills you need to run your business,
those scenarios can happen. I believe that the relationship we
have with our workforce at Grangemouth and those who represent
it, and the track record of realising—not just BP but the
unions as well—that this is all about competitiveness. Provided
we keep our heads and recognise that this is about competitiveness
in a very tough market—and it has not gone away just because
we have managed to save Grangemouth from being a loss-maker to
being profitable—this journey will always be there. The
question is, how do you make Grangemouth the most competitive
site? By retaining the key skills and the key workforce who actually
have the knowledge in order to run the site effectively. You would
have to be a poor judge as a manager if you decided that it would
be good for the site to dismantle that. I do not think any company
that has decided to buy the site, any shareholders that have invested
in the site, would regard that as a prudent course of action.
Q54 David Hamilton: That is the key question
of course, if you take a long term view and invest in the site
then that will not happen, the alternative being that if you do
not take a long term view about investing in the site that will
happen, and that is the point we are trying to make. You made
the point earlier on that you cannot speak for the future, but
you are the very person who can speak for the future, you are
the chairman of the group, who else can speak for the future?
Mr Conn: I am not the chairman
of the group but I am a managing director. I can speak for the
future in a sense in terms of my views on it. I certainly believe
very strongly that the future evolution of the chemical markets
around the world require big players who are independent and for
whom petrochemicals is the only business. That is the central
reason for why the Olefins and Derivatives business is being created
as a separate company.
Q55 David Hamilton: Coming back to the
formal questions, on your website there is a page devoted to the
Grangemouth plant. Under the heading "A community partner"
it says "BP recognises its social and ethical responsibilities
to the communities in which we operate." Don't those fine
sentiments have rather a hollow ring to them, seeing as you have
brought so much uncertainty to the people of Grangemouth?
Mr Conn: It is certainly true
that we have brought uncertainty at the moment. I do not accept
that those positions have a hollow ring to them however. For any
major site that is involved deeply in its community—and
we get involved in many initiatives including the Future for Falkirk
or the Falkirk Future, and we are involved deeply with Falkirk
football ground where there has been a lot of co-operation—we
are concerned to make sure today that Grangemouth is intimate
with the community in which it operates. Any owner of a site that
has got thousands of people and, therefore, as you pointed out
earlier, thousands of dependent people, has to have a relationship
with the community and it has to ideally be one that is fostered
on trust and co-operation and mutual benefit. I do not believe
that any new company the size of this new company, which will
be one of the biggest in the world, could possibly ignore the
community interface.
Q56 David Hamilton: Can I just wish the
company and the people in Grangemouth a long time with Falkirk
football team.
Mr Conn: I think that is probably
wise advice.
David Hamilton: I am grateful.
Q57 Chairman: Just looking at the future,
Mr Conn, if you could indulge me for a minute, would you foresee
a situation whereby the Norwegian pipeline could feed straight
into the UK oil and gas grid, and that, therefore, it would no
longer be necessary at all for any of the oil or petrochemical
industry to have any sites in Scotland?
Mr Conn: You are asking me for
a personal opinion and therefore, for the record, I want to make
it clear that this is a personal opinion and not BP's position,
but there are many pipelines that are already connected to the
UK that do not go through Scotland. That is the first thing, whether
it be into Bacton or Easington or the Interconnector from Zeebruge,
these are all connected to the UK and not through Scotland. However,
for as long as there are significant quantities of hydrocarbons
in the UK sector of the North Sea and in the Norwegian sector
of the North Sea, given that the infrastructure is already largely
in place and most of it interconnects, it is extremely difficult
to see a scenario where that hydrocarbon would best be routed
to avoid Scotland. Therefore, I have to believe that as long as
people are prudent in thinking forward about the future, understand
the evolution of the North Sea, understand the commercial
realities of infrastructure and what we need to invest in and,
may I say, a government that is sensible about the fiscal situation
and encourages investment, then I believe there will be sufficient
chemical feedstock for the two big sites in Scotland for a long
time. I could not possibly tell you for how long.
Q58 Chairman: But that is your personal
opinion.
Mr Conn: It is.
Q59 Chairman: BP does not have an opinion?
Mr Conn: As the managing director
of BP I would hazard a guess that our opinion would be very similar,
I just do not actually know of our policy statement on the matter.
I feel confident, enough, however, to give you that answer myself
and as a director you can draw your own conclusions.
David Hamilton: I was just going to make
a comment about prudence, but that may not be appropriate.
Q60 Chairman: No. Mr Conn, that concludes
our questions to you, thank you very much for your attendance.
Before I declare the session closed, is there anything you wish
to add to what you have already said?
Mr Conn: I would only wish to
add that I hope that through co-operation and good judgment—co-operation
with those who represent our workforce—we can actually create
a competitive environment and a good future for Grangemouth, but
there will always be change and some of that change will be difficult.
As long as we continue on the path that we have done in the past,
meeting it square on and deciding what is right for the competitiveness
of the site, then I believe that even under new ownership of part
of the site its future will be a good one.
Chairman: Thank you very much for your
attendance, Mr Conn.
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