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Scottish refinery strike could cut UK’s oil production by 45 percent 

BY LANANH NGUYEN and LAURA HURST

LONDON (Bloomberg) -- Ineos Group Holdings SA is shutting the 210,000 barrel-a-day Grangemouth oil refinery and petrochemical site before a strike this weekend that could halt 45 percent of the UK’s crude production.

The company is progressively stopping units before a 48-hour industrial action planned by Unite union workers, scheduled to begin on Oct. 20 at 7 a.m. local time.

“We’re currently going through a safe shutdown of the site,” Richard Longden, a spokesman for Ineos, said by phone from London today. “The units will be brought to a cold status by the time the strike action starts.”

Grangemouth workers held a two-day strike in April 2008 that cut North Sea oil output and disrupted fuel supplies across Scotland. The site supplies power and steam to BP Plc’s neighboring Kinneil processing plant, which handles oil from the company’s Forties Pipeline System (FPS) gathered from more than 80 offshore fields. FPS is scheduled to load 387,000 barrels a day of crude in October, according to a shipping program obtained by Bloomberg news.

Union representatives and Ineos will meet today for talks mediated by the UK’s Advisory, Conciliation and Arbitration Service after discussions ended yesterday without resolution, Unite said in a statement last night. The discussions are scheduled for 1 p.m. in Glasgow, Scotland today, according to the UK Department of Energy and Climate Change.

“We’re in touch with Ineos to establish the possible impact of the shutdown,” Robert Wine, a London-based spokesman for BP, said today by phone. Operations at the Kinneil plant will depend on the outcome of negotiations between Ineos and the union, he said.

Forties output averaged 382,000 barrels a day this year, according to loading programs obtained by Bloomberg News. The UK’s average crude production was 850,000 barrels a day this year, data from the International Energy Agency show. Forties is the most abundant of four crude grades that make up the Dated Brent benchmark used to price more than half the world’s crude. The others are Brent, Oseberg and Ekofisk.

“We have been monitoring the situation very closely,” Cameron Ramos, a spokesman for the Department of Energy and Climate Change, said today by phone from London. “This isn’t something that has come as a surprise.”

The Grangemouth refinery is jointly owned by Ineos Group Holdings SA and PetroChina Co Ltd, while Ineos is the sole owner of the petrochemical site.

Oil producers lost about 50 million pounds ($80 million) a day in the 2008 outage, reducing the country’s tax revenue by at least 25 million pounds a day, according to Oil & Gas U.K., an industry group that represents offshore producers.

“Brent prices may soon have to deal with potential disruption in North Sea production if a planned strike at the Grangemouth refinery, which plays a key role in the supply of Forties crude, goes ahead,” JBC Energy GmbH, a researcher in Vienna, said today in a note.

Brent crude fell 59 cents, or 0.5 percent, to $110.45 a barrel as of 10:11 a.m. London time today on the ICE Futures Europe exchange.

10/15/2013

 

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