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Grangemouth strike: who’s fuelling who?

The Sunday Times: Grangemouth strike: who’s fuelling who?

Government is urging consumers not to panic but Scotland is facing fuel shortages as the Forties pipeline prepares to close

Tom Gordon and Stuart MacDonald
April 27, 2008

Angus McCall watched last week’s planned strike at the Grangemouth oil refinery unfold with a growing sense of trepidation. The livestock and barley farmer from Golspie, in Sutherland, heard successive politicians offer assurances that the dispute would not cause a fuel shortage in Scotland, but that did not square with what was happening locally.

Next week he was planning to sow this year’s barley crop. If he does not have enough fuel to get the job done, it will affect his yield. He also needs diesel to operate the machinery that feeds his livestock. Failure to do so, as well as affecting his livelihood, could see him breach animal welfare laws.

“I am running out of fuel fast and I’m being told supplies are scarce, which is very concerning,” he said. “I’ve probably got enough in my tractor to see me through until Monday, but if we are sowing barley next week and I can’t get fuel, I will be at a standstill.”

Last week the Scottish government sought to reassure consumers that fuel supplies would be maintained during the strike and its aftermath, provided people act responsibly and do not panic buy.

But, as with the run on the Northern Rock bank last year, there is nothing more certain to make consumers panic than telling them not to panic. True to form, queues began to form at petrol stations around Scotland almost immediately, with some running out of diesel and many putting up prices.

The Shell station on East Marketgait in Dundee has been without fuel since 10pm on Tuesday. At the Bridge of Dee Asda store in Aberdeen some pumps were closed and Galashiels ran out of diesel on Thursday. The Rix garage in Kirkcaldy blamed a “misunderstanding” with its computer after diesel shot up to £1.45 a litre.

With talks between plant operator Ineos and the Unite union floundering, at midday on Thursday, John Hutton, the UK secretary for business, enterprise and regulatory reform, said he saw no need to enact emergency legislation.

At the same time in the Scottish parliament, Alex Salmond, the first minister, appealed for cool heads. But by 5pm the situation had changed, and John

Swinney, the finance secretary, admitted in a statement to MSPs that the strike posed a serious threat to the flow of North Sea oil. He confirmed that the BP Kinneil plant next to Grangemouth would not receive enough steam and power from its neighbour during the strike to work normally. Kinneil is one of the most important parts of the UK’s oil infrastructure, separating the oil and gas that comes from 30 fields drained by the Forties pipeline system. It processes 40% of the output from the UK’s North Sea fields, some 700,000 barrels of crude per day.

Of this, Grangemouth has the capacity to refine only 200,000 barrels a day, with the rest exported by coastal tanker to refineries around the UK.

Besides costing the UK economy £50m a day, the closure of Kinneil meant the closure of the Forties pipeline and the shutdown of dozens of oil rigs. Suddenly, what began as a local pay dispute began to look like an ever-widening disaster.

Swinney gave out mixed messages during questioning, insisting the situation was normal, yet urging people to avoid non-essential trips and use public transport where possible.

In private, SNP business managers were telling their MSPs to stay overnight in Edinburgh the following week rather than try to return home because of the strike.

With confusion at the highest levels, it is small wonder the public are uncertain of how to react. So what is the most likely impact of the strike? Are the public being given the full facts by politicians? Is the strike nothing more than an inconvenience or does it have the potential to bring Scotland to a standstill?

ONE haulage and recycling company in Rigside, near Lanark, has already run out of diesel for excavation and loading machinery. Sandy McCracken, who employs about 70 people, has had to lay off three workers because there is not enough for them to do.

“We were supposed to get a delivery on Thursday but it never arrived,” he said. “I couldn’t get any at all last week – it’s really hit us hard. We might not be able to load some of our lorries for jobs.

“I am just hoping supplies pick up again so they can get back to work. The longer this goes on, the worse it’s going to get. We have about enough fuel to fill our trucks until the middle of next week but after that we could really be in trouble. We have asked for a delivery on Tuesday but I don’t know whether it will come or not.

“I had a meeting with our MSP Karen Gillon on Friday but I don’t think there’s a lot that can be done at a local level and the government seem to be burying their heads in the sand. Our fuel costs have risen by about £8,000 in the last six months, which is already putting us under pressure, without the risk of shortages. We’re struggling to stay in business.

“We are the only major employer left in this area and I don’t want to see any more people losing their jobs.”

Taken at face value, the assurances offered by Salmond and Hutton are correct. The current 48-hour stoppage is likely to be nothing more than a mild inconvenience. Under European law, the UK is obliged to hold 67.5 days of oil supplies, and there are currently 12m tons of stock.

The Grangemouth jetties should re-open almost immediately after the strike ends, allowing the import of fuels from England and overseas, and the export of crude from Kinneil to other refineries.

Although the strike means Grangemouth will not return to full capacity for three weeks, that does not mean a complete loss of services. Crucial elements will be working again quite quickly.

BP Kinneil, which will be kept ticking over during the stoppage, should restart within 48 hours of the strike ending.

While it closes and the Forties pipeline is out of action, North Sea rigs can bring forward annual maintenance shutdowns.Other UK refineries can also draw on stocks to process in the absence of crude from Kinneil.

If supplies remain tight, ministers can try “demand calming measures” such as asking employers to let staff work at home, rearranging work hours to use less fuel and encouraging car sharing.

Motorists will be urged not to drive unless it is strictly necessary, tune engines for maximum efficiency and reduce their car weight by stripping off roof racks and emptying the boot. Drivers would also be asked to travel at a steady speed below 50mph to conserve fuel, turn off the engine whenever stationary and avoid using air-conditioning.

The real hardship would come if the strike worsened. If the dispute escalated,and Grangemouth were to shut down completely for weeks instead of days, and the Kinneil plant and Forties pipeline close with it, it would mean a national crisis. Everything depends on the duration and extent of the closure.

“If the Forties pipeline has to shut down for much longer, the situation will change from being a local one causing a fair bit of disruption to being a UK-wide crisis,” according to Dr Clifford Jones, reader in engineering at Aberdeen University.

“If the pipeline shuts down, that’s about 40% of the oil from the UK sector of the North Sea, and simple contingency measures like bringing fuel up from England don’t work any more.

“I think we would see a rise in the price of Brent crude, of the kind seen recently when hurricanes threatened oil platforms off the southern coast of the United States.

“The social and economic effects will be major, a bit like the mid-70s when Opec was refusing to supply us with oil. We were just about on our knees then. There’s a basis of comparison if the Forties pipeline is closed.”

Scotland’s only big refinery, Grangemouth is pivotal to the country’s energy needs. It also supplies the English borders. The nearest refinery is the Petroplus site on Teesside, 190 miles away, with barely half Grangemouth’s capacity. Its output, which is largely diesel and does not include petrol, is already in demand by other markets.

The nearest refinery producing petrol is the ConocoPhillips Killingholme plant in Lincolnshire, 290 miles away, which has a capacity only about 10% larger than Grangemouth’s.

Besides the problem of sourcing surplus supplies for Scotland, there is the problem of transporting the fuel. The reason there are relatively few oil tankers on UK motorways is that England is crisscrossed by a network of private pipelines that transport petrol and diesel from coastal refineries to local distribution depots.

For instance, an Esso pipeline system takes fuel from its Fawley refinery near Southampton to terminals at Birmingham, and Heathrow and Gatwick airports. The West London pipeline services Heathrow and Gatwick with aviation fuel from Hemel Hempstead’s Buncefield depot, scene of the UK’s biggest peacetime fire in 2005.

The problem for Scotland is that the two pipelines that cross the border – the Shell pipeline from Stanlow in Cheshire and the BP/Sabic/Ineos line from Teesside – are both routed into Grangemouth.

Unite say that during a strike nothing at the plant would function as normal, including the pipelines, which would be kept ticking over for safety reasons, but

no more.

Although the government also operates a 1,500-mile network of pipelines built during the second world war, this was created to ensure petrol was available for the allies in France after D-Day and concentrates on the south coast. It extends north only as far as Humberside.

With the Grangemouth jetties shut, that would leave road transport as the costly route of last resort, with a limited supply of lorries running either from central England into central Scotland, or from the tanker-supplied docks at Inverness and Aberdeen.

In such circumstances, with acute pressure on forecourts and critical services facing possible shortages, Hutton would be able to enact emergency powers under the 1976 Energy Act.

These include measures to ration fuel at the forecourt, to set up designated filling stations for priority users such as schools, hospitals, the emergency services and food hauliers, draw down UK fuel stocks and allocate supplies of imported fuel.

The police could be asked to keep order at filling stations, opening hours would be restricted and a maximum purchase limit set per visit, with fines of up to £5,000 for those caught cheating.

According to a former Scottish minister, the army could also be drafted in, as they were during the fuel blockade eight years ago, when military drivers trained in transporting hazardous materials drove fuel lorries.

The Cabinet Office has already asked the Ministry of Defence if it had the staff to work the steam-generating plant at Grangemouth needed to keep the Forties pipeline functioning. It didn’t.

Whether the military are deployed in other roles may now turn on the relationship between Ineos, and its reclusive billionaire owner Jim Ratcliffe, and Unite.

http://www.timesonline.co.uk/tol/news/uk/scotland/article3822953.ece

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