Saturday, April 19, 2008

More trouble for Brown - this time Scotland

Strikes in the Chemical and process industries are very rare. They are capital intensive industries and down time has a catastrophic impact on the sites economics. However a strike at Grangemouth in Scotland is on the cards. Apparently causing the shut down of the refinery to start now, with fuel interruptions expected in the north of England and Scotland over a month period.

There may be knock on impacts on North Sea oil production - unless extra exports can be made from BP's Kinneil terminal in Scotland. ( If you don't take the oil out of the pipeline, then you can't put any more in, there is also a need to remove the natural gas liquids - though I think this may still be carried out by BP rather than Ineos - which should help keep export of crude possible ). Corresponding offshore shutdowns may follow for those platforms linked to the Forties systems and a stop of the associated gas production.

The economy of Scotland may have a heart attack, as may some of Northern England.

All this in the weeks leading up to the local elections in Northern England.

Mr Brown will be having his ear bent by his constituents very shortly.

The pressure on the refinery operator Ineos to settle will be extreme. But in the long term this may help kill Scotland's petrochemical industry. Part of the problem may be the move away from the high pay of a company like BP (the former owner of Grangemouth) to a more competitive operator like Ineos. ( Did you know BP has sold its last UK refineries ? Quietly BP and Shell are reducing their exposure to the UK and its left wing government - soon perhaps one of them will leave the country.

Mr Salmond will be buzzing about this as will Mr Brown. The political test will be the emergence of queues at petrol stations (remember what happened to Labour's poll rating s last time this happened). This will be interesting, though the odds have to favour a quick settlement ....

PS If you live north or Liverpool to Leeds then I'd make a point of filling the tank over the next day or so.

Update: Now Guido has picked up on the political implications here.

Also Man in a Shed continues to be puzzled about the length of the down time required for the refinery. I would have thought Ineos and the Union could come to some agreement to keep the refinery ready to start up with minimal manning. The Union get what they want - production stopped for two days - and the company start up faster.

This month long shut own is odd. Man in a Shed suspects that Ineos has moved key maintenance and inspection tasks forward perhaps from a Summer shut-down. In which case the company loses very little and exerts maximum pressure on the Union. Some enterprising journalist should be on this angle.

A public health warning should also be attached to some of the speculation on the impact on the North Sea - which just goes to show how ill informed some commodity traders really are. The key point will be flaring from Kinneil. If they are allowed to break their flaring consent ( and why shouldn't they ) then crude and NGL can be stabilised for export, as the majority of it already is. It may be possible to export the ethane via pipelines to England or Exxon's Fife ethylene plant.

Update 24Apr08: The impact of this outage is becoming clearer. The Forties pipline system will have to shut with corresponding field shutdown and impact on gas production from fields sending associated gas to St Fergus. The key problem is at the Kinneil NGL gas processing facility operated by BP. I am assuming their is not significant propane, butane or NGL storage capability there (ethane export options may exits by pipelines to Mossmorran and Northern England ). See presentation on an unplanned outage in June 2007 of this plant here.

There are also signs of relations between the employer and Unions worsening - this could lead to further significant economic damage to the economy.


Anonymous said...

The SNP will be rubbing their hands at this.

Man in a Shed said...

My guess is the SNP will use this an excuse to demand more powers for the Scottish Executive/Government.

This has the advantage of getting them off the hook and advancing their agenda at the same time.

It will be interesting to see if the fuel crisis actually turns up or not. Of course there has been time for planning for quite a while. Also fuel can continue to be belnded from "rundown"stocks for some time at Grangemouth.

Panic buying would be the most likely cause of a shortage.

Also Petrol supplies to outlying areas in Scotland have always been a problem, and people out there may suffer.

But I am still amazed that the Unions and company would allow the closure of a refinery (INEOS's only refinery I think ). THe associate petrochemicals will be hit hard and as I mentioned before this is a capital intensive industry - which means keeping things running is vital to stay in business.

The odds have to be on a settlement in the next few days.