You’ve doubtless heard of the National Grid, the network of pylons and electricity infrastructure ensuring the country is supplied with power. You’re probably aware that there is a similar national network of gas pipelines sending methane into millions of our boilers.
But far fewer people, even among the infrastructure cognoscenti, are even faintly familiar with the UK Ethylene Pipeline System. Yet this pipeline network, obscure as it might be, is one of the critical parts of Britain’s industrial infrastructure. And it’s also a useful clue to help explain why the government has just announced it’s spending more than £120m to bail out the chemical plant at Grangemouth in Scotland.
Ethylene is one of those precursor chemicals essential for the manufacture of all sorts of everyday products. React it with terephthalic acid and you end up with polyester. Combine it with chlorine and you end up with PVC. And when you polymerise ethylene itself you end up with polyethylene – the most important plastic in the world.
Why Grangemouth matters
Ethylene is, in short, a very big deal. Hence, why, many years ago, a pipeline was built to ensure Britain’s various chemical plants would have a reliable supply of the stuff. The pipes connected the key nodes in Britain’s chemicals infrastructure: the plants in the north of Cheshire, which derived chemicals from salt, the vast Wilton petrochemical plant in Teesside and, up in Scotland, the most important point in the network – Grangemouth.
The refinery would suck in oil and gas from the North Sea and turn it into ethane, which it would then “crack”, an energy-hungry process that involves heating it up to phenomenally high temperatures. Some of that ethylene would be used on site, but large volumes would also be sent down the pipeline. It would be pumped down to Runcorn, where the old ICI chlor-alkali plant, now owned by INEOS, would use it to make PVC. It would be sent to Wilton, where it would be turned into polyethylene and polyester.
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That’s the first important thing to grasp about this network – it is essential for the operation of a whole series of plants, many of them run by entirely different companies.
The second key thing to note is that, after the closure of the cracker at Wilton (now owned by Saudi company Sabic) and the ExxonMobil plant at Mossmorran in Fife, Grangemouth is the last plant standing. While the refinery no longer uses North Sea oil and gas, instead shipping in ethane from the US, it still makes its own ethylene.
So when INEOS began consulting on plans to close that ethylene cracker, officials down south in Westminster began to panic. The problem wasn’t just the 500 or so jobs that might have been lost in Grangemouth. It was the domino effect that would feed throughout the sector. All of a sudden, all those plants at the other ends of the pipeline would be affected too. In practice, the closure might have eventuated in more than a thousand job losses – maybe more.
What’s happening now?
All of which helps explain the news today – that the Department for Business and Trade is putting more than £120m of taxpayer money into the site. The bailout (it’s hard to see it as anything but) is not the first. The government has also put hundreds of millions of pounds of taxpayer money into British Steel, which it quasi-nationalised earlier this year, not to mention extra cash into Tata Steel at Port Talbot and loan guarantees to help Jaguar Land Rover after it faced an unprecedented cyber attack.
But while this package will undoubtedly provide Christmas cheer here in Grangemouth today, the government is left facing two distinct problems.
Reactive rather than strategic
The first is that for all that the chancellor and business secretary (who are themselves planning to visit Grangemouth today) are keen to pitch this latest move as a coherent part of their industrial strategy, it’s hard not to see it as something else. Far from appearing strategic, instead they seem reactive. To the extent that they have a coherent industrial strategy, it mostly seems to involve forking out public money when a given plant is close to closure. If they weren’t already, Britain’s industrialists will today be wondering to themselves: what would it take to get ourselves some of this money in future?
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The crisis continues
The second issue is that the Grangemouth bailout is very unlikely to end the crisis spreading across Britain’s chemicals sector. A series of plants – some prominent, others less so – have closed in the past few years. The chemicals sector – once one of the most important in the economy – has seen its economic output drop by more than 20% in the past three years alone.
This is not just a UK-specific story. Something similar is happening across much of Europe. But for many chemicals companies, it simply doesn’t add up to invest and build in the UK any more – a product in part of regulations and in part of high energy costs. In short, this story isn’t over yet. There will be more twists and turns to come.
