Bosses at Ineos have warned that their petrochemical site at Grangemouth will close in 2017 unless action is taken to halt the site’s £150 million annual loss.
It reckoned that as many as 1,350 direct jobs could be lost if the huge energy site is shut down, with hundreds of supply and other posts also affected.
Calum Maclean, Ineos chairman of Olefins & Polymers Europe, said the plant would be closed in three years unless the company can find a way to run the site more efficiently.
Mr Maclean said the main reasons for the massive losses are the decline in North Sea petrochemical feedstocks and the site’s pension scheme deficit of £200m two issues Ineos is working to address.
But he also warned that the infrastructure upgrades necessary to secure the future could cost up to £350m.
“The plant has to become more cost-effective,” Mr Maclean said.
“Ineos has invested £1 billion in the Grangemouth site since 2006, but over the last three years the whole site has been losing around £150m annually and that is forecast to continue.
“The feedstock gas coming from the North Sea is declining. We have a modern asset in our petrochemical cracker, but it is only running at 50% because of the lack of feedstocks.
“Unless we get alternative feedstock to supplement the North Sea supply then the petrochemical side of the business will not continue beyond 2017.”
Ineos is looking to source shale gas from the USA to solve this problem and get the cracker operating at 100%.
However, this would require an investment of £150m to prepare the site for that feedstock, and a further £200m to offset losses while the required new tanker facility is being built.
If the shale gas contract is signed and the investment is put in place, Mr Maclean believes that will secure the future of the plant for at least the next 20 years.
However, this needs to be combined with a change in the pension scheme, which currently runs at 65% of employees’ salary.
“It’s got to the stage it is unsustainable,” Mr Maclean said. “We are talking to the union about that now.”
Unite is balloting members for strike over the firm’s alleged mistreatment of union member Stephen Deans and issues surrounding agency workers.
Earlier this month Jim Ratcliffe the chairman and billionaire founder of the chemicals group said the Grangemouth plant was “at a crossroads”.
He said the plant had “not been a successful asset” for Ineos, and had lost the company “a significant amount of money”.
Mr Ratcliffe warned that gas from the North Sea contributed to the Grangemouth facility’s expensive cost base, and that to have a future it required cheaper raw materials and a “sensible” cost structure.
“If we can’t resolve those issues, it would need to shut down,” he warned.