Further memorandum submitted by the T&G
Union
IMPLICATIONS FOR GRANGEMOUTH—BP'S PLANS
FOR PETROCHEMICALS BUSINESS SELL-OFF
The purpose of this paper is to briefly outline
T&G Scotland's main concerns in relation to the proposed sale
of BP's chemicals business, which includes operations at BP Grangemouth
and to highlight how the petro-chemicals operations is integral
not only to the plant as a whole, but to the local and Scottish
Economy.
BACKGROUND
BP announced plans to sell off its chemicals
business in April 2004, which would cover 24 sites across the
world including Grangemouth. A significant part of the Olefins
and Derivatives (O&D) is based at BP Grangemouth meaning that
workers there now face an unstable future.
Whilst no details of any job cuts have been
given the T&G is wary that there are longer term intentions
for a company flotation prior to a sale to a USA-based business.
We believe that should the chemicals operations
be sold off, the future of Grangemouth would not be safe and that
the splitting up the petrochemical and refinery businesses could
potentially affect the long-term sustainability of the entire
Grangemouth site.
BP GRANGEMOUTH OPERATION
BP has been in the petro-chemical business in
Scotland since the 1950s. In Grangemouth, BP operates the refining
and petro chemicals complex, the largest industrial site in Scotland
and one of the largest, most integrated oil and gas complexes
in the world. The site also handles oil and gas processing and
transportation for many of the fields in the North Sea.
The Grangemouth complex houses Scotland's only
refinery along with a number of petrochemicals plants, and the
processing and export system for a large proportion of the oil
and gas coming from the North Sea. Over 1,400 BP employees plus
contractors work on the site, which operates a continuous production
basis.
The Grangemouth complex is one of the UK's most
significant petro-chemical sites producing around two million
tonnes of products annually. Most of Grangemouth's products are
classed as "chemical intermediates" which are used by
other manufacturers to produce a host of everyday products including
plastics, textiles, pharmaceuticals and packaging. The bulk of
Grangemouth's chemical's production is exported to its customers
in England and Europe.
The Grangemouth complex imports raw materials
from north sea offshore facilities which are then processed before
use in the manufacture of fuels. Transportation routes include
a pipeline from the deep water ocean terminal at Finnart on Loch
Long and the Forties pipe line system. Most of the crude oil and
gas liquids feedstock used on the site arrive via the Forties
Pipeline System and are then processed at the Kinneil facilities
adjacent to the refining and petrochemicals complex. Once stabilised,
the crude oil, known as Forties blend, is pumped to a storage
tank facility at Dalmeny prior to export through the Hound Point
terminal. A proportion of the crude goes to the refinery at Grangemouth
for the manufacture of fuels.
Gas contained in the liquids coming through
the Forties pipline system to the Kinneil facilities is compressed
and passed through a de-ethaniser where methane and ethane are
produced. These gases are then used as fuels for the Grangemouth
complex or by the petrochemicals plants as feedstock.
The Grangemouth petrochemicals facility is one
of BP's three major UK production centres, the facility manufactures
over 1.8 million tonnes of product per annum. The site is well
placed to make use of natural gas liquids from the North Sea,
and has been selected for significant expansion of its operations.
At the heart of the Grangemouth site are ethylene
crackers, which produce the feed materials used by its other plants.
The two units produce 700,000 tonnes per year between them. The
resulting products ethylene and propylene, are short-chain molecules
containing reactive double bonds. Plants downstream of the crackers
either separate these chemicals or use their reactivity to produce
further products.
Products are transported to customers around
the UK and continental Europe by ship from Grangemouth docks and
roads to other plants. Piplelines also deliver products to customers
nearby and to ports and futurities across the UK.
LINKS TO
ECONOMY
Directly, at the moment, BP 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.
BP's business activities in Scotland remain
a visibly important component of the Scottish Economy. There is
also a large number of jobs attributed to the site from suppliers
across central Scotland.
Refining and petrochemicals, as exemplified
by BP's Grangemouth complex, remain an important component of
Scotland's industrial activity. BP Grangemouth production represents
just under 10% of the gross national product of Scotland. Around
265,000 jobs across the UK are dependent on the oil and gas industry,
of which approximately 31% of these jobs are in Scotland. Only
8% of the total is represented by people actually working on offshore
installations. By far the majority of the jobs are related to
the supply and service chain.
A number of indicators demonstrate how the BP
site is integral to the local economy. The Forth Valley Economic
Assessment Report 2004, shows that Forth Valley is more dependent
on its manufacturing sector than Scotland as a whole, and in particular,
has a very large chemicals sector when compared to the rest of
Scotland.
Furthermore, that the ability of the Forth Valley
Region to achieve its economic goals is dependent to a large extent
on the businesses located in the region and their performance.
Location quotients in the 2004 report show that in the Forth Valley
chemicals and fuel refining accounts for over eight times more
employment than in Scotland as a whole.
The chemicals and fuel refining sectors in the
Forth Valley have been hit by cutbacks at BP and other firms in
the region in recent years. The industry employs an estimated
2,100 staff and relatively high productivity in the sector means
that the industry that remains still contributes a substantial
proportion of Forth Valley output (estimates at just under 7%
of total output in the region).
BP are also major stakeholders in terms of local
economic development particularly the 10-year Falkirk Action Plan
led by Scottish Enterprise, Forth Valley, Falkirk Council and
BP. The FAP is set to create 4,250 new jobs, stimulate up to £200
million of additional investment, attract a diverse range of businesses
to the area and generate £50 million a year for the Falkirk
economy, with many projects being linked to the business stemming
from the operations at Grangemouth.
MAIN CONCERNS
The main concern in regards to proposed sell
off is that BP will lose control of a major part of its operations.
This has ramifications in terms of job security, safety and the
overall future of the site as a whole.
It is clear that a new owner of the chemicals
site will operate independently from BP, and this also has ramifications
in terms of job security, safety and the future of the site. BP
has costed an exit strategy for Grangemouth and it is concerning
this has even been looked at as the effect a total closure of
operations would have in Scotland would be devastating.
Specific concerns include:
— Impact on the local and Scottish
economy as a whole.
— Future security and long term sustainability
of entire site.
— Impact on direct and indirect employment
in surrounding area.
Employees at BP Grangemouth have worked hard
to accommodate restructuring and feel that they have been rewarded
for their co-operation by being transferred out of the company.
Our experience of employment transfers shows that workers often
end up worse off under the new employer and we therefore want
to secure guarantees from BP about the long-term security of our
members' jobs, as well as the long term future of the site as
a whole.
November 2004
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