Scottish Refinery Deadlock Gets Political as Workers Await Fate

Photographer: Mike Wilkinson/Bloomberg

Vapor is seen rising from the cooling towers at the Grangemouth refinery, Scotland's sole oil refinery, operated by Ineos Group Holdings Plc., in Grangemouth, U.K. Close

Vapor is seen rising from the cooling towers at the Grangemouth refinery, Scotland's... Read More

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Photographer: Mike Wilkinson/Bloomberg

Vapor is seen rising from the cooling towers at the Grangemouth refinery, Scotland's sole oil refinery, operated by Ineos Group Holdings Plc., in Grangemouth, U.K.

As the owners of Scotland’s only oil refinery weigh its future, politicians in Edinburgh are hurriedly trying to save the plant with less than a year to go before a referendum on independence.

The Scottish government said yesterday it was seeking overseas buyers for the Grangemouth facility after talks reached a stalemate between labor union Unite and Switzerland-based owner Ineos Group Holdings SA. First Minister Alex Salmond left his Scottish National Party’s annual conference in Perth at the weekend in an attempt to broker a deal. Ineos said last week it was shutting down output at the site.

“The loss of the refinery would raise questions about the security of supply,” Alex Kemp, an economics professor at Aberdeen University and author of a history of North Sea oil, said in an interview yesterday. “You can’t just rely on plentiful imports because exports from the U.S. are not going to be widely available over the longer term.”

Grangemouth is to manufacturing in Scotland what Royal Bank of Scotland Group Plc (RBS) is to the country’s finance industry: too big to fail, economists said. Panicked motorists and truckers flooded fuel stations across Scotland in April 2008 when members of the now 1,350-strong workforce at the refinery and adjacent petrochemicals plant went on strike.

Seeking Options

“In view of the clear danger of a stalemate developing between the owners and the union, the Scottish government has indeed been actively pursuing alternative options,” Finance Secretary John Swinney said yesterday. “The priority today is to urge that the Grangemouth refinery starts working again.”

Ineos, which jointly owns the refinery with PetroChina Co. (857), met shareholders yesterday to decide the future of the plant. It will inform employees of the outcome of those discussions today, the company said in an e-mailed statement.

Unite said 665 workers, or about 65 percent of its members at Grangemouth, rejected a “survival plan” from Ineos that includes a proposal to replace a final salary pension, change working terms and shut inefficient units. The company said 250 employees supported the plan as of Oct. 19.

The oil and gas industry, along with finance, is a key plank of the SNP’s case for Scotland’s independence.

A referendum on breaking away from the U.K. will be held on Sept. 18, 2014. Support for independence is about 20 percentage points behind remaining part of the union, according to TNS BMRB and YouGov Plc polls over the past month.

Must Act

“It is so important to the Scottish economy that we want a resolution, we are not going to sit by and not do anything,” a Scottish government spokeswoman, who asked not to be named citing internal policy, said yesterday.

The refinery, located about 25 miles west of Edinburgh along the Firth of Forth, has a capacity of 210,000 barrels a day, according to data compiled by Bloomberg. It provides fuel to areas of northern England as well as Scotland.

The Grangemouth site also supplies power and steam to BP Plc (BP/)’s neighboring Kinneil processing plant. Kinneil handles crude from the Forties Pipeline System, gathered from more than 80 offshore fields. The network pumps about 45 percent of the U.K.’s oil output while the refinery supplies about 80 percent of Scotland’s fuel needs.

Edinburgh Airport, which normally gets all its fuel from Grangemouth, said it will keep contingency measures in place until the dispute is resolved.

“Grangemouth is very important,” said David Bell, a professor of economics at Stirling University. “It’s about 8 percent of Scotland’s manufacturing sector. In terms of the making of things, it’s one of the most, if not the most important single plant in Scotland.”

To contact the reporter on this story: Tim Farrand in Edinburgh at tfarrand@bloomberg.net

To contact the editor responsible for this story: Rodney Jefferson at r.jefferson@bloomberg.net

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