Memorandum submitted to the Committee
by T&G Union
INTRODUCTION
The Trade Unions at BP Grangemouth remain unconvinced
by the economic and operational case put by BP for sale of it's
Olefins and Derivatives business at the Grangemouth site and are
gravely concerned that this will have a medium to long term detrimental
impact on manufacturing industry and the economy as a whole in
Scotland. Despite these concerns the Trade Unions see it in the
best interests of our members to continue to participate in discussions
relating to the both the terms and conditions of employment for
this "NewCo" and also the operational and organisational
structures of a de-integrated site.
TERMS AND
CONDITIONS
— Months of prevarication and
stalling tactics raising suspicions of inferior terms and conditions
on transferring to NewCo.
— BP offer end September eluded
to an attack on terms and conditions after 12 months with NewCo.
— Unanimous vote by members for
industrial action to preserve terms and conditions. (At this point
the view was that this could only be achieved by remaining as
BP employees.)
— Ballot put on hold to allow
space for discussions to resolve outstanding issues. (five weeks)
— Offer on terms and conditions
put to mass meeting 11 November 2004.
SITE/BUSINESS
GOVERNANCE
— High level "in-fighting"
with BP senior management at corporate level and at site level
over governance and commercial deals on feedstock prices ie NewCo
looking for £40 million reduction in liquid and gas feedstock
costs from BP.
— "Single site" principal
under threat.
— Grangemouth management structure
de-integration creating new interfaces and conflicts.
— Shared Asset/services de-integration—including
people/skills/knowledge transfer.
— Lack of forward vision of how
Grangemouth site will be operated and the impact of de-integration
on both the O&D business transferring out of BP and the Refining
and Exploration business remaining with BP.
POLYMER PLANTS
REVIEW
BP O&D have carried out a European review
of their Polymers plants as part of a wider review of assets.
Indications are that at least one plant at Grangemouth
will close—Rigidex 3, which produces High Density Polyethylene
(HDPE). This has been made much simpler by the purchase by BP
of their HDPE European joint venture (JV) partner, Solvay. Over
the last three years as part of this (JV) decisions were made
that have been to the detriment of Grangemouth and Scottish manufacturing
industry as a whole.
Rigidex 2 plant was closed and the proposed
replacement—"COBRA" plant—was scrapped in
favour of a BP/Solvay plant in Belgium. This decision resulted
in the transfer of production of a number of HDPE grades out of
Scotland. The grades that transferred to Belgium were some of
the more profitable HDPE grades such as black pipe grade (European
market).
In October BP O&D transferred production
a second profitable HDPE grade—yellow gas pipe grade (UK
market) with further proposals to transfer production of the last
remaining profitable HDPE grade—blue water pipe grade (UK
market). The transfer of these grades is being carried out on
the premise that the "commodity" grades now replacing
the pipe grades have a higher volume of sales and fully load up
the plant to capacity.
The facts are that because these grades continue
to be unprofitable it makes Rigidex 3 look unviable and may be
used to justify closing it.
At the same time BP O&D have moved manufacturing
of prime profitable products that are exclusively for the UK market
to continental Europe—with all the additional transportation
cost—to the detriment of Scottish manufacturing in particular
and the Scottish economy in general.
The economic impact of the closure of Rigidex
2 last year, coupled with the closure of another one or more plants
in the near future could be devastating in terms of direct employment
and also suppliers and contractors.
There are also indications that considerations
are being made to close two more plants at Grangemouth—Innovene
2 (HDPE) and G4 Ethylene Cracker.
We believe that these options are being investigated
as part of an appraisal for a proposed project to build an ethylene
export facility. This export facility could be built at Grangemouth
or Hull but again, we understand that at least two derivatives
plants—Rigidex 3 and Innovene 2—would need to close
to enable the export facility to be fully loaded with ethylene.
Given the inherent short-termism of BP, the
trade unions also believe that we must guard against threats to
the Ethanol plants at Grangemouth which have just completed a
maintenance overhaul and are to remain shutdown until early December
where they will continue to run on a "batch" basis indefinitely.
The facts are that the short term "sky
high" oil price means that BP O&D are making far more
money producing ethylene and exporting it rather than processing
and manufacturing derivative products at Grangemouth.
REFINERY IMPACT
— Refinery plants supply feedstock
to Chemical plants on a continual basis. There would be serious
implications for the Refinery plants if any of the key Chemical
plants were to close. A review of all O&D assets is currently
in progress.
— The North Sea oil pipeline capacity
is partially governed by Chemicals plant ability to deal with
gas which is simultaneously transported through the pipeline.
The Chemical plant review has obvious and serious implications
around this issue.
PROCUREMENT IMPACT
At the last Scottish Select Committee meeting
a question was raised regarding the impact on suppliers.
After the last meeting we requested information
from our procurement department regarding how much money was spent
with suppliers based at or with Scottish branches.
The number of suppliers used by BP Grangemouth
was 1,680.
The number with Scottish address including branches
was 640.
The total spend this year is $600 including capex.
Only 17% of this is spent in Scotland.
THE EFFECT
OF PLANT
CLOSURES
| Rigidex 3 | 2,843 stock items
| £2,100,000 | 70 jobs |
| Innovene 2 | 2,787 stock items
| £2,116,000 | 60 jobs |
| Ethylene 4 | 3,000 stock items
| £1,800,000 | 130 jobs
|
| Ethanol 3/4 | 2,000 stock items
| £1,200.000 | 70 jobs |
| |
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This would impact dramatically on the number of orders placed
with suppliers and cause redundancies with them as well
SHARED SERVICES
IMPACT
Currently over 500 personnel are employed in shared services.
It is our understanding that Service level agreements have
been put in place for as little as one year. These agreements
will then be put out to tender with the service probably going
to the lowest bid.
IMPACT ON
LOCAL COMMUNITY
AND SCOTTISH
ECONOMY
What commitment are NewCo and BP prepared to give to their
long term future to manufacturing at Grangemouth and security
of employment?
11 November 2004
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