Site Closure

There have been many announcements of site closures in Europe in recent months. Given the new petrochemicals capacity coming on line in the Middle East, there are undoubtedly more to come in the coming months and years.

Site closure is a strategic decision, based on the long term economics of a business. The business aims will have been defined as part of the decision process.

However, Site Closure is unlike any other project; as well as being complex, with EHS, technical and regulatory challenges, it is also highly emotionally charged, with many of the people involved in the process being directly affected by the consequences. Having been in the middle of this process several times myself, I can state from experience that it is very different from other types of project.

A well-managed site closure process will achieve all of the aims of the impacted business, it will ensure a positive transition for the impacted employees and will satisfy all regulatory requirements. All of this whilst controlling costs and taking advantage of a number of financial opportunities which can arise.

The flip side is that poorly managed site closure can have a number of serious consequences, impacting both the profitability and the reputation of the parent company.

For example, the process can become unnecessarily protracted, leading to significant extra cost. Staff morale can decline sharply in the period between announcement and closure, leading to increased risk, unreliable production and hence customer dissatisfaction.

Key staff can be lost early in the process if thought has not been given to their future in the organisation. Legacy issues such as land contamination can lead to problems with regulators or landlords. The resale value of assets is not realised and property value (lease or freehold) is not optimised.

With the 'typical' cost of a site closure in the order of $10-15 M, the difference between a successful outcome and a poorly managed outcome can be very significant.