Exxon Mobil Corp's (XOM.N) push to persuade workers at its Beaumont, Texas refinery to sign a five-year contract, nearly twice as long as the last one, is part of an effort to avert labor stoppages during a possible expansion that could make it the largest such plant in the United States, sources familiar with refinery operations said.
In a bid to win support, the company has offered a $4,500 bonus to hourly workers represented by the United Steelworkers union, which normally only signs three-year deals in the refining industry, the sources said.
A longer-term contract, the sources said, would allow the company to avert walkouts if it decides to proceed with a building project that would take until 2020 to complete. It might also weaken the local's hand in future talks, they added.
As Reuters reported in July, before crude prices plunged, Exxon is evaluating a multibillion-dollar expansion to lift the refinery's processing capacity to between 500,000 and 800,000 barrels per day from 344,600 bpd now.
The centerpiece of the plan, which would bolster the U.S. Gulf Coast's position as a top global supplier of gasoline and diesel, would be the addition of a third crude distillation unit.
"They're talking about spending all this money for an expansion at Beaumont," said one of the sources. "They don't want the opportunity for a strike."
A spokesman for Exxon, which often tells investors it takes a long-term view in a cyclical business, said stability is the goal of the five-year contract.
"Beaumont is negotiating with (USW) Local 13-243 to pursue a longer-term, off-pattern contract that will provide enhanced stability," said Exxon spokesman Todd Spitler. "We believe a long-term agreement will maintain Exxon Mobil's ability to compete in a range of economic conditions."
Acceptance of the proposal would leave the USW Beaumont local out of sync with the union's national bargaining program for refinery workers. That means Beaumont workers might lose some of the leverage they have with the world's largest publicly traded oil company because they would no longer be able to negotiate as part of a nationwide bloc.
"The cost if they lose is Exxon will handle them the way it wants to handle them," said one of the sources.
Since talks started several weeks ago, union leaders have rejected offers made by Exxon Beaumont, according to messages sent to refinery workers by the company.
Local union leaders in Beaumont declined to discuss the negotiations with Exxon.
PREVIOUS BUILDOUTS $4-$10 BILLION
In addition to the five-year length, Exxon's "last, best and final" contract proposal, made on Jan. 31, includes annual wage increases equal to those that could be agreed to by the USW and U.S. refiners in current contract talks and again in 2018.
The offer contains a $4,500 ratification bonus on top of the bonus that could be won at the other USW-represented Exxon plants.
It also includes a 75-day notice before the union can go on strike or the company can lock out workers that can only be exercised after the contract expires.
Most contracts only require a 24-hour notice of a strike or lockout after a contract expires, according to messages sent to workers and posted on an Exxon web site.
A price tag hasn't been placed on the possible Beaumont expansion. The cost will depend on the choice and size of the units Exxon builds if it goes ahead with the project.
Expansions with the addition of a crude unit at Gulf Coast refineries in the past 10 years have cost between $4 billion and $10 billon and took between four and five years to complete.
Workers at the Beaumont refinery are working on 24-hour rolling extensions after their contract expired on Feb. 1.
Beaumont has not been affected by walkouts, some now in their 12th day, that were called at 11 refineries and chemical plants to push for a new, three-year nationwide refinery pact.
Talks between and industry negotiator Royal Dutch Shell (RDSa.L) and the USW, which represents the striking workers and those at 52 other U.S. plants, have so far failed to produce an accord.
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