INEOS boss highlights contractor skills concerns

York, UK - INEOS chief executive Tom Crotty has pointed to skills shortages in the UK’s contractor population as a major stumbling block, both for his company and the entire UK process sector – as highlighted by a £500-millon project over recent years to refurbish and upgrade the chemicals group’s Runcorn chemicals site since its acquisition from ICI in 2001.

Operated by subsidiary INEOSChlor, Runcorn is an integrated, world-scale site that pumps salt from the local Cheshire brine fields and electrolyses it into caustic soda and chlorine products. The operation, said Crotty, is a extremely energy intensive, to the extent that it uses the same amount of electricity as the entire City of Liverpool. The site upgrade, which started in 2005, involved building a new steam generator power station built and converting the site away from the use of mercury cell rooms.

“While the construction phase of the project was well managed, ahead of schedule and on budget, it lost momentum dramatically when it moved into the engineering phase,” explained the INEOS boss. This, he said, was mainly due to skill shortages, such as problems in sourcing fitters for the GRP piping, which is used extensively in a chlorine cell rooms.

“At one point, the site was using the UK’s entire availability of pipe fitters, and that was still only 50% of what was actually needed,” said Crotty. “We also saw a serious decline in standards as we ramped up the labour on the project,” said the INEOS executive. “So when it came to really drawing people in from a wider and wider geographic area the quality of the people we were able to draw in declined.

“In a contract population the quality people will be focused locally. So they will have local sites to work on and won’t be tempted to work on projects half way across the country. So when you have a big project sucking in 2000-plus contractors you really get a problem with maintaining standards.”

Such issues are likely to persist on projects over the next few years, not least because INEOS will have to compete for contract skills with other industries, according to Crotty: “We are seeing right now a lot of money going into infrastructure development, a lot of investment in new power operations, in shipbuilding in Scotland, that are pulling skills away from our industry.”

The INEOS chief went on to describe outsourcing as “a dangerous place to be” from a cost-control point of view: “We were also concerned that there were a lot of key skills for running large chemical complexes must be retained within the organisation that were again contracted our to third parties. That made the decision to in-source (services from operations acquired from ICI and BP] fairly easy for us.

“We always have an approach when we buy businesses that we can take a lot of costs out of the operation, typically 25-30% of these costs out of every acquired business within two years ... So we are taking out contract employees in areas that are non-productive and reinvesting some of that money back into people that we employ in areas that are productive.”