Process Flare-up Leads to Blacklist Fear

July 8, 2009
Dispute over refinery project may make investors wary.

An industrial dispute at Total's Lindsey oil refinery (LOR), Immingham, England, has raised fears that the whole area — which is a center for chemical processing in the U.K. — might end up blacklisted by potential investors. It also highlights problems caused when European Union (EU) law, national agreements and local collective agreements clash.

Since coming on-stream in 1968, LOR is now the country's third largest refinery with 10 million tonnes/year capacity, or more than 200,000 barrels/day. It has the flexibility to process more than 40 different types of crude oil — between 85% and 95% comes from the North Sea.

The industrial relations problems involve a more-than -£200-million ($281 million) project to install a new hydrodesulfurization unit known as HDS-3. The main construction contract was awarded to Jacobs Engineering which then recruited the 600–1,000 workers needed on the project. This included a tendering process to which five U.K. and two European contractors responded. A contract was subsequently awarded to IREM, an Italian contracting company based in Syracuse on the eastern coast of Sicily, with some work going to U.K. companies, too.


Some of the work won by the U.K. companies was subsequently handed to IREM, with the loss of 51 jobs, according to unions. This, say the unions, breaches an agreement with Total that no British workers would be replaced by workers from other European countries. Although Total denies any such agreement, the sackings prompted wildcat action across the U.K.

Among the other sites affected, Scotland's Grangemouth oil refinery was hit by a walkout by up to 800 BP and INEOS workers, while as many as 600 demonstrators gathered outside chemical and steel plants on Teesside in North East England in support of the Lindsey workers. Another 50 workers downed tools in protest at the Aberthaw power station in South Wales.

The unofficial action saw 647 workers sacked in addition to the original 51.
Total pointed out that with the HDS-3 project already six months behind schedule and €100 million ($140 million) over budget because of delays, under-performance and low productivity, further cost overruns jeopardize the future viability of important inward investment into the U.K.

However, following a June 29 Advisory, Conciliation and Arbitration Service (ACAS), London, mediation, the dispute was called off after Total and Jacobs Engineering signed a deal with workers' unions. Jacobs and Total will reinstate all 647 workers the company sacked after the unofficial strikes began, and offer new jobs to the 51 workers whose laying-off sparked the dispute, according to reports. IREM has agreed to move 120 staff off the HDS-3 plant contract and onto other projects.

While the Unite union welcomed the agreement, which includes an official being appointed to represent Lindsey workers on a full-time basis until the end of the project, local Members of Parliament (MP) are concerned about long-term implications for the area.

"It is great that an agreement was reached and that people have returned to work and there is no bitterness," says Shona McIsaac, Labour MP for Cleethorpes and Immingham. "However, it is important we don't get a reputation for the area as having poor industrial relations, to ensure there are future employment opportunities for our area."

Labour MP for Great Grimsby, Austin Mitchell adds: "I do believe the government and Europe needs to modify their views on employment within the sector and get ACAS involved quickly to resolve any issues."

The ACAS reference is important as the organization issued a report about the dispute earlier in the year. It found that while Total, Jacobs Engineering and IREM didn't break EU law and acted in accordance with collective agreement in the recruitment of overseas workers for construction of the LOR desulfurisation unit, the dispute highlights issues with introducing foreign workers within the U.K. labor relations system.

"Whilst the report shows no evidence of the law being broken there is a source of tension around the Posted Workers Directive and its application to construction work and the U.K.'s industrial relations system," says John Taylor, ACAS chief executive.

The complexity produced by the interrelation of EU law, national agreements and supplementary local collective agreements is a potential source of confusion and dispute, according to ACAS. The organization recommends a review by relevant parties of the interrelationship between national and local collective agreements to aid transparency and reduce potential for future misunderstandings and conflict.

Seán Ottewell is Chemical Processing's Editor at Large. You can e-mail him at [email protected].

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