 | Oilwatch Monthly - April 2008 | The Oil Drum: Europe | ITN: Grangemouth/Forties YouTube--just for a little more flavor... |  |
Grangemouth: the origins of dispute (Thread 1)
Posted by Prof. Goose on April 23, 2008 - 1:45am in The Oil Drum: Europe
Topic: Supply/Production
Tags: gasoline, gasoline prices, grangemouth, oil, oil prices, refineries, scotland [list all tags]
[update 5 by Euan, 23 April]
Latest from the BBC (Wednesday evening)
BBC Scotland understands operators Ineos and the Unite union have failed to agree a halt to an impending strike by workers at the Grangemouth plant.
It therefore looks like Ineos will have to proceed with closing the plant which they say will take 4 weeks to restart. We'll be back with a fresh thread in a couple of hours.
[update 4 by Euan, 23 April]
Latest from the BBC (Wednesday pm) with a fine video:
As the hours tick by the likelihood of widespread disruption looks increasingly likely
[update 3 by Euan, 23 April]
Wednesday lunchtime and Ineos are still meeting with trade unions seeking a settlement. Fuel runs out at some gas stations - according to the BBC news.
Some background on The European Gas Market.
[update 2 by Euan, 22 April]
According to this report by CNN, BP has confirmed that the Forties pipeline system may have to close if the Grangemouth strike goes ahead. 700,000 bpd UK North Sea production may be lost.
In addition to lost oil production, many gas fields may also have to be shut down as liquids produced with the gas will have no export route. More news on natural gas production if it is confirmed that the strike will go ahead.
Ineos is reported to be the world's third largest petrochemicals company. Privately owned by UK businessman Jim Ratcliffe.
[update by Euan, 22 April]
According to Reuters:
Management and trades union officials at the Grangemouth refinery in Scotland are to meet on Tuesday at the ACAS conciliation service for talks to avoid a strike planned at the weekend, a union official said.
"There's a party going to ACAS this morning for a meeting at 2 pm," Gordon Russell, a union convenor at the refinery for the trade union UNITE.
Russell said management had made no new proposals at talks with the union on Monday evening to avert the strike called over the 200,000 barrel a day refinery's pension scheme and the two-day strike was still set to go ahead on Sunday.
"Everything stays as it is pending the discussions," he said.
The planned strike at Grangemouth was one of the factors driving oil prices to a record high on Monday.
Refinery owner Ineos has started closing one of the refinery's three crude processing units as part of a safety shutdown ahead of the strike.
A shutdown at Grangemouth would reduce flows of North Sea crude into Britain and hit British gas supplies, if the Forties pipeline, which feeds the refinery, is forced to close.
Roads are visibly quieter around Aberdeen today.
[original by PG, 21 April]
First the BBC reports:
Motorists have been urged not to panic buy fuel amid warnings that the shutdown of Scotland's only crude oil refinery could lead to shortages.Ineos claims it could have to close its refinery at Grangemouth for a month on safety grounds ahead of a strike by 1,200 members of the Unite union.
Industry analysts told the BBC that there is no need for drivers to stock up with petrol at the pumps.
Here's a map of the BP refinery and pipeline system in the area:
and here's a link to a fact sheet about the Ineos Grangemouth Refinery....
We welcome your input on developments, resources, and links to other/related stories in the area. Thanks.
Its unclear what the magnitude of this story will be, though oil markets did spike when this was announced on Friday. No new news on wires in over 12 hours, though Bloomberg is reporting that the 'point of no return' is now 4/24-4/25. Is it possible that this is political cover for emergency maintenance or some such? Is this linked to financial situation re: pensions? Anyone with insight or updates, please comment.
An article by the Daily Mail points to a row over pensions ...
The article goes on to say Ineos has already started shutting down the Grangemouth refinery.
I spoke with our UNITE union rep (I'm an engineer in Scotland)and it is a genuine grievance.
Marco.
Marco,
You wouldn't expect the union to say anything different would you? And of course the company will say they are behaving perfectly reasonably. Perhaps we should see if both sides are willing to go to binding arbitration where the only option is complete acceptance of one side or the other, i.e. no meet in the middle compromises, winner take all:-)
Uh-oh, the government said to remain calm. Now we're really in trouble.
And so the picnic begins.
http://thescotsman.scotsman.com/latestnews/-The-fuel-panic-begins.400142...
I didn't see it quite as busy in this in the city yesterday, but then again there are less petrol stations outside Edinburgh than in the city itself.
Grangemouth refines approximately 10% of the annual UK road fuel consumption.
There will be panic buying, not only in Scotland and Northern England - but it will likely spread to other parts of the country.
The 67 days reserves will be depleted initially at a greater rate than normal, causing fuel distibution problems.
Expect another rise in price at the pumps. Diesel has already reached £1.20 at one Texaco station in Surrey.
Rapeseed oil is 98p/litre in Sainsburys - I expect more than a few are tempted to used a diesel/rapeseed mix in their tanks.
In Germany, this has actually occurred over the last few years - and it is illegal, since the fuel tax has not been paid.
And pretty hard to hide - the exhaust has a certain 'Duftnote' or scent.
Not illegal in the UK since July 2007. It was costing HMRC too much to collect the duty from small users, so as long as you "produce" less then 2,500 litres a year, then you pay no duty and no VAT. Details here:
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.por...
Interesting - German police will still occasionally check fuel tanks (mainly trucks) to see what is in them.
There was a person selling rapeseed oil near where I lived, but according to a local fuel seller (who does sell biodiesel), he was shut down because the taxes involving burning fuel for road use were not paid.
Apparently, the British perspective is more along the lines of little fish always swim free anyways, so why bother? Especially in regards to how stores that sell vegetable oil do not need to register.
I'd guess a truck could easily use more than the 2,500 litre limit though, so the owner should either have paid the duty themselves or bought it from a supplier that was paying the duty and gave them a receipt to say so.
Personal use is fine though, and as a supermarket is not selling oil as fuel it doesn't affect them.
I heard that HMRC was spending in the region of £100 to process each duty payment, but the cheques they were receiving were often only for £10 or so! Also, they'd found that the number of people registered as biofuel producers had gone up from less than 10 at the start of the decade to a couple of thousand, so I guess what was a Friday afternoon task once a month had suddenly become a full-time job!
Anyway, I'm happy, because my car has a conversion to burn neat veg oil as well as diesel :-) I don't normally burn food-grade oil, but if there's a fuel shortage I have the option.
Interesting point about veg oil sales in the UK.
Last year I was able to buy veg oil (for cooking) for about 38p/litre.
Once it became legal for individuals to walk into a supermarket and buy veg oil for their cars the supermarkets quickly found that people were coming in and buying a whole shelf’s worth of veg oil in one go. They were, in effect, selling fuel at 38p/litre.
As the next cheapest option is normal diesel at 105p/litre, the supermarkets quickly moved to price food grade veg oil on parity with diesel.
So now the supermarkets are charging 95p/litre and upwards for veg oil to ensure that there is no benefit for car owners to empty the shelves. (Remember veg oil has slighly less energy per unit volume than diesel)
A good example of how biofuels will be priced at the exact same price as their closest competitor regardless of how cheap they are to produce, due to their miniscule sales volumes.
The Free Market at work.
Andy
Much of the UK's gas supply (st fergus) is controllled at Grangemouth, our analysts are predicting the strike will not be allowed to go ahead on the grounds of security of supply (for gas) rather than any oil/petrol shortage.
The gas comes through Kinneil terminal and not at the refinery. Unless the union operates both and is specifically shutting both Grangemouth and Kinneil down, then the strike might not impact gas production.
From what I have read it's the condensate in the gas that is the problem - the refinery deals with that.
According to the BBC mid afternoon Wednesday some gas stations are out of fuel and prices are rising, whether the strike goes ahead or not!
http://news.bbc.co.uk/1/hi/scotland/7363081.stm
The forecourts are stacking up significantly in and around Aberdeen right now.
This is important too:
http://news.bbc.co.uk/1/hi/scotland/tayside_and_central/7363093.stm
CalMac and Scotrail and Farmers...
Pressure on industry in fuel row
The dispute by staff and managers at the Grangemouth oil refinery is leading to growing pressure on commercial fuel consumers, it has emerged.
Ferry operator Caledonian MacBrayne said it may restrict services from Thursday to conserve fuel supplies, if the planned action goes ahead.
Scotrail, which gets all of its fuel from Grangemouth, said it was monitoring the situation closely.
Negotiations to resolve the dispute are currently being held at Acas in London.
Up to 1,200 Grangemouth workers, who belong to the Unite union, plan to strike on Sunday and Monday over plans to change their pension scheme.
Ineos, which operates the refinery, has begun shutting down the plant, which processes 210,000 barrels of oil a day.
I have a hard time believing this strike and associated outage will occur. In recent times the British have been particularly poor at striking compared to our continental friends. Given the ramifications of such action, I'm fairly confident that "something" will be agreed to avert the direct action. However as we move forward over the next few years and the economic and energy situations deteriorate, it's situations like this that are likely to cause the most immediate damage. I'm just hoping it doesn't start this week!
Given this assumption what can we do to alleviate any short term shortages?
"Bury full Jerry cans in the garden"?
Nick.
The strike is by the refinery operators. It is not clear if the oil and gas flowing through the refinery to other destinations will be affected.
It is clear that the oil company is talking up the panic as much as possible, talking of scotland being without fuel for a month, and no mention of reserves, imports, or the fact that the refinery only produces 10% of UK fuel.
On the radio (Radio 4) this morning the operator did have to backtrack and talk of 2 to 3 weeks to restart the refinery.
I don't doubt that the refinery is struggling with margins at $117 oil, but UK drivers are even more inelastic in demand than in the US due to the high taxes. We are used to $8 gas, $10 gas won't stop us driving.
I would find it deeply ironic, given that PO is going to make all pensions worthless, if a pensions dispute was to trigger turmoil in the UK . There is no mention on the media of the price of oil at the moment, or the fact that diesel is in increasingly short supply. It is true that a final salary pension scheme is very expensive for an employer in the long run, it is a huge perk, especially as it is the only type of pension likely to survive peak oil. (My dad has had a very comfortable retirement on one). That said, the company is simply cutting the wages of the workers in real terms at a time they are making record headline profits.
I wonder how many people will support the Union - my understanding is that the pensions are non-contributory - nice, if you can get it!
Most people in the UK don't have non-contributory final-salary pensions any more. The refinery and these workers are competing in a world market, what are the pensions rights and salaries elsewhere.
Also, I think the refinery is expected to be loss making for a number of years and requires substantial investment.
I wonder why BP sold the refinery in 2005?
Bear in mind that UK North Sea oil production will be largely FINISHED by 2020, so maybe no requirement for refineries in the UK ... especially if we end up importing refined product.
We expect the least profitable refineries worldwide to have to close once volumes fall away post peak, so refining is going to be very competitive very soon (if not already).
Which makes me start thinking that the company is escalating this dispute as political cover for shutting down the refinery in the near future. That way they can simply blame the union/workers for sabotaging the profitability and get away with lower redundancy payments and less political blowback. Also, this could be a dry run to see how well Scotland can be supplied with fuel from other existing sources.
Do you like my new cycle helmet? Lined with aluminium foil...
RalphW,
Whilst 10% might appear a trivial amount, it might prove difficult to make up that quantity from other sources - particularly if these are unavailable or already overstretched - in the case of diesel.
Some of the more experienced data crunchers on TOD will have a better knowledge of the likely effect of what happens when demand exceeds supply by 10%.
As a population, we are prone to act irrationally, and although we may have reserves for 67 days, by European law, I am sure that there will be a considerable rush on the filling stations for the next few days and this will have a knock-on effect to the normal fuel distribution pattern.
Additional fuel transport costs to the regions affected by the closure of Grangemouth will put up the pump price elsewhere, leading to an escalation of concern in other regions.
The 200,000 bbl/day capacity of Grangemouth is about the same amount of motor gasoline that the US imports from the EU, UK, and Norway. If everyone in the UK rushed to fill their tanks, MOL would be breached, and the imports to the US stopped or slowed, in order to rebuild stocks. If that spills over regionally into the US, then certain areas receving those imports could experience spot shortages, resulting in panic filling, resulting in a breach of MOL, resulting in a cascade across the country. Not too hard to imagine a worst case scenario playing out, if panic anywhere sets in.
Petrol panic looms as protesters threaten blockade, strike closes major refinery and oil hits record high
By PAUL SIMS - More by this author »
Last updated at 09:20am on 21st April 2008
Comments (11)
Fears were growing last night that Britain could lurch towards another fuel crisis.
As forecourt prices hit record levels and oil went above $117 a barrel, campaigners said they were secretly planning a series of blockades in an attempt to bring the country to its knees.
Angered by the Government's planned 2p rise in fuel duty, they pledged to recreate the chaotic scenes which saw tens of thousands of drivers panic-buying in 2000.
sorry, forgot the link:
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article...
Ah the Daily Mail. You can always rely on that esteemed publication to provide calm, rational and positive support to a beleaguered administration
{wink}
Yes:
Usually along the lines of how it will affect your house price...
BTW: I thought Refinery blockades were now covered by anti-terrorist legislation?
Don't panic Mudlogger - the economy is fundamentally sound. Resiliance has been built in at every possible point to help us get through situations like this.
You mean like the sound advice I get from my wife? - 99% sound, 1% advice!
BTW, INEOS is private equity, run by the UKs 10th richest man Jim Ratcliffe, last year it led the Sunday Times KPMG Top Track 100 list of Britain’s private companies by sales.
http://en.wikipedia.org/wiki/Jim_Ratcliffe
http://www.timesonline.co.uk/richlist/person/0,,46957,00.html
Mr Ratcliffe’s past experience of brinkmanship should also serve him well in the present dispute. In 2001, Ineos threatened to close its chlorine plant in Runcorn, Cheshire, unless it received a government grant. Two years later the Government agreed, handing over £50 million.
It must be!
The goverment bought Northern Rock and is now lending (against secure assets I may add)a further (initial) 50 billion to the banking sector. UK PLC must be rolling in money (or debt) to afford all this. Maybe some private equity company will buy the UK and save the day! The good thing is that tax payers money will not be put at risk under any circumstances (reassurance).
Summary:-
The banks loan money to the extent that is bankrupting the nation
The nation lends money it hasn't got to the banks against secure assets (mortgages) that may not be so secure
There is abosolutely no risk to the taxpayer
Its hilarious listening to all this Bull Sith from the government et al, they must think the entiire nation came down the river on a banana boat.
Does Grangemouth lie in Gordon Brown's constituency?
No, but it is not far away across the River Forth. Google maps gives Kirkcaldy to Grangemouth as just under 34 miles; or 25 miles from Cowdenbeath (the other major town in the Prime Minister's constituency)
AKH
Yes Euan (I get your sarcasm...) fundamentally sound as in:
Wages liked to CPI, UK people in great personal debt, Prices for food, fuel, energy going up at 4-5 times the CPI rates. 10% Tax rate canned...
UKPop are not in good shape.
I suspect the forced dismantling of unions will happen more frequently in the future as energy supplies get more scarce.
I'm sure Blackwater (TM) would gladly accept a fat contract to bust the union and make Britain 'safe' for freedom loving souls again.
Thanks for the link, Mudlogger. What I found particularly interesting were the readers' reactions (48 comments at this writing – way above the average for the Daily Mail, incidentally). No mention whatsoever of peak oil or oil depletion. No, it's all the government's fault and that's all there is to it. Though commenters seem to disagree as to whether what is needed is more or less government intervention.
Here are some excerpts from the comments section, for your entertainment:
Peak oil awareness raising still has a long way to go.
Number of Daily Mail commenters on Petrol Panic report now up to 63.
Latest gem:
Where does one start?
They are 20 deep at the Bridge of Don Aberdeen ASDA Petrol station at present.
According to my wife, in Glasgow today the petrol stations she passed were all "busy enough not to bother queueing" at the moment. Just as well we don't need to fill up (yet!)
AKH
''oil lives under the sea for free''.
''but these costs are in the region of 3 p a litre...''
ROTFLMAO...
Sometimes, just sometimes, I wonder if we are gonna make it...
...as a species.
dorme bien.