Ineos's Grangemouth oil refinery has been shut in a dispute over workers' pensions Photograph: Murdo Macleod
Scotland's biggest
oil refinery was shut down on Wednesday as the owners of the Grangemouth site refused to back down in an industrial dispute with the
Unite trade union.
Ineos, which owns the plant on the Firth of Forth, said it will await a response from its 1,300 staff to proposed pension changes before deciding whether to reopen the plant. However, the pensions dispute is part of a tangled web of grievances between Ineos and Unite, including the involvement of Grangemouth's chief shop steward in the furore over the selection of Falkirk's Labour parliamentary candidate.
A spokesman for Ineos said workers would receive proposals on Thursday to replace their final salary pension scheme. He said: "Grangemouth is shut down and it will remain shut down. When we have got a response from the workforce we will consult with our shareholders and make a decision."
Ed Davey, the energy secretary, assured motorists the shutdown would not affect Scotland's petrol and diesel supplies.
The plant processes about 200,000 barrels of oil a day and supplies most of Scotland's fuel. The closure could also disrupt the flow of North Sea oil into Scotland because BP's giant Kinneil processing terminal next door relies on Grangemouth for its power.
The decision to close Grangemouth came after talks between the company and Unite broke down on Wednesday morning. Unite called off a planned 48-hour strike set to start on Sunday and said it was doing so to protect the plant from being damaged by the shutdown.
The Scottish secretary, Alistair Carmichael, said he was concerned by Ineos's decision, and wanted to know why it had attached conditions to keeping the plant running. He said: "It doesn't look constructive because this is a dispute which has enormous danger of damaging Scotland's economy and confidence. For that reason, I think there is a legitimate interest for government both in Edinburgh and London to hold both parties to account here. Be in no doubt that the stakes are exceptionally high. This could be seriously bad news for Scotland's economy."
Unite attacked Ineos for going ahead with a "cold shutdown" that would put Grangemouth out of action for a month even after the plant was reopened. The union had called for a partial "warm" shutdown during its strike to allow the plant to tick over and resume operation quickly. But despite the union's decision to cancel its strike, Ineos went ahead with its shutdown and upped the stakes by raising the prospect of permanent closure.
The dispute between Unite and Ineos is complicated by claims and counterclaims over a number of grievances.
The planned strike was over Ineos's treatment of Stephen Deans, Unite's convenor in Scotland who works at the plant. Deans was implicated in the furore over the selection of Falkirk's Labour parliamentary candidate, which ultimately saw the party and the police clear Unite of allegations of vote rigging.
After he was suspended from the Labour party, the police decided to bring no charges against him and Labour reinstated him as chairman of the local party. But Ineos has carried on with its own inquiry, based on the allegation that Deans recruited party members on the company's premises.
The talks also covered the future of Grangemouth and Ineos's proposals.
Ineos claims Grangemouth is losing £10m a month and cannot survive without huge investment and cost cuts. Last month it presented a "survival plan" to its employees that included the closure of the final salary pension scheme and a request for £150m of government support.
Alex Salmond, Scotland's first minister, said the dispute would not affect fuel distribution and indicated that the Scottish government will invest in the site in a bid to help resolve the dispute. "What is important – and what now is at stake – is the future of Grangemouth as a chemical complex and a refinery in Scotland, and that can only be brought about by investment in the plant.
"The Scottish Government is happy to assist with such an investment package, but before that can happen there needs to be goodwill on both sides between management and the unions."
Ineos said it agreed to reopen Grangemouth as soon as possible if the union delayed any further industrial action until the end of March, but that Unite refused. Unite also refused to accept Ineos's version of Grangemouth's financial position.
A major sticking point was Unite's refusal to apologise for its claim that Ineos had taken money from the pension fund – an allegation that sparked a libel action. Unite said Ratcliffe demanded a public apology in return for withdrawing the suit.
Ineos is owned by its management, headed by chairman and chemicals industry veteran Jim Ratcliffe. The company expanded from its launch in 1998 by snapping up chemical works. It gained a reputation as a canny but hard-nosed operator and now has a turnover of $43bn (£27bn). PetroChina bought a stake in Grangemouth in 2011 in a deal that was meant to secure its future.
Grangemouth's Labour MP Michael Connarty said: "This isn't 1970s management; this is 1920s management. Big companies shouldn't be able to hold our country to ransom. Major national assets shouldn't be left to the whim of a couple of hard men from the chemicals industry."
Grangemouth is Ineos's biggest production centre and operates refinery and petrochemicals plants on a 1,700-acre estate 25 miles from Edinburgh. Ineos bought the site from BP in 2005 when the oil giant decided to dispose of its olefins and derivatives businesses.
Connarty said Ineos acquired the plant when the economy was booming, enjoyed a year or two of bumper business and then suffered as demand fell in the global recession.
"They made the mistake of buying these things when the world economy was turning down and now they blame the workforce," he said.
Unite yesterday released an analysis of Grangemouth's finances by tax consultant Richard Murphy. He disputed Ineos's claims and said Grangemouth Chemicals – the only accounts he could find – made a profit in 2012 and was expecting £117m of tax gains that could only occur if the company earned £500m over the next few years.
Murphy said total labour costs, including exceptional pension expenses, were 16.9% of revenue and total labour costs "should not be a critical cause for concern".
But with the stakes suddenly increased the future of Grangemouth is starting to look critical.
