Scotland’s Grangemouth Refinery Stays Shut as Talks Fail

Grangemouth, Scotland’s only refinery, will probably stay shut this weekend after talks broke down between its owner Ineos Group Holdings SA and the Unite union over plans to cut costs and changes to wages and pensions.

Ineos, which operates the 210,000 barrel-a-day facility and a petrochemical plant, said the union refused to rule out industrial action during a 60-day consultation on the company’s cost-cutting plan. Unite, the U.K.’s largest union, said it would only return to talks if the company suspends the proposal.

“For any negotiations to take place they have to drop the imposition on the workers,” Peter Welsh, a spokesman for Unite, said by phone today. Employees already offered to hold off on any industrial action until Dec. 31 in the last round of mediated talks, which ended without a deal this week, Welsh said.

Unite called off a 48-hour strike on Oct. 16 which threatened to cut about 45 percent of the U.K.’s crude production. The site supplies power and steam to BP Plc (BP/)’s neighboring Kinneil processing plant, which handles crude from the Forties Pipeline System, gathered from more than 80 offshore fields.

Workers at Grangemouth, which processes about 80 percent of Scotland’s fuel, held a two-day strike in 2008 that curbed North Sea crude output as well as disrupting fuel supplies.

“The union refused to accept Ineos offer to restart the Grangemouth plant in exchange for a commitment that there will be no further industrial action this year” after a meeting this morning, Ineos said in an e-mailed statement today.

Supplying Steam

The facility will continue to supply steam to Kinneil while the refinery is offline, Richard Longden, a spokesman for Ineos said by phone from London yesterday. The Grangemouth oil refinery is jointly owned by Ineos and PetroChina Co. (857) Ltd., while Ineos is the sole owner of the petrochemical site, which has a capacity of 1 million tons a year.

Scotland’s First Minister Alex Salmond met with both parties yesterday, urging Ineos to restore production and calling on the union to pledge not to strike until the end of the year, according to a statement from the Scottish government.

Restoring full production after the outage could take weeks, Ineos said yesterday. During the eight weeks it took to reach normal refinery operations after the 2008 strike, a compressor caught fire and crude oil leaked, the company said.

Workers had planned a walkout on Oct. 20 because of a dispute over union leader Stephen Deans and disagreements over pay and conditions. The parties failed to reach a deal after two days of talks this week mediated by the U.K.’s Advisory, Conciliation and Arbitration Service.

Ineos started direct consultations with employees yesterday, including a proposal to replace a final salary pension plan, change working terms and close inefficient units, the company said. The company aims to get a response from workers by Oct. 22 and will consult its shareholders about resuming production after that, Longden said.

Unite is looking to take legal action over the plan, which it said introduces “pay freezes and pay cuts,” the union said yesterday.

To contact the reporter on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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