Crucial talks aimed at averting a 48-hour strike from Sunday at the Grangemouth oil refinery in Central Scotland broke down last night, according to union officials.

The two-day strike will now go ahead. Industry observers have given warning that the plant's “point of no return” would in any event be reached in the next 24 hours with significant consequences both for the refinery's production and the wider Scottish economy.

A union spokesman said: “Unite's negotiators were disappointed with the company's refusal to withdraw controversial pensions plans and, therefore, the two-day strike will go ahead.

“Although the strike has not been averted, Unite and the company have reached an agreement that will maintain the safety of the site and the integrity of the plant.”

Negotiations between management and the Unite trade union at the London headquarters of the conciliation service Acas were halted yesterday evening as Ineos, the owners of the Grangemouth plant, continued a gradual shutdown of the site in order to make it safe.

Scottish government ministers are on standby and are preparing contingency plans to ensure emergency services and key sectors of the economy can continue to be supplied with fuel.

Last night senior sources within the offshore industry confirmed that unless basic utilities - steam and electricity - at the nearby Kinneil processing plant were maintained it could be necessary to close down the Forties Pipeline System, the pre-

eminent North Sea pipeline.

Steam and electricity from the Grangemouth refinery are essential to operations at Kinneil, where crude oil from the Forties system is stabilised by removing sulphur and extracting gas, which is then sent to the petrochemical plant at Grangemouth.

“If it [crude oil] stops moving it has to stay in the ground,” said Trish O'Reilly, a spokeswoman for Oil and Gas UK, the trade association of North Sea operators. “We hope that the dispute can be settled before any action is taken, but if they can't, we are urging them to take the necessary steps to ensure that utilities are provided to keep the pipeline open.”

If the pipeline is closed, operators said it would take several days to re-commence production in about 50 oil fields, because of safety requirements.

BP confirmed that it was preparing for a possible closure of the pipeline and had sought assurance over the supply of utilities to Kinneil. A spokeswoman said: “We do have procedures in place to flare excess gas if we can't export to Grangemouth. However, we require utilities to run the pipeline at full capacity. We are investigating alternative means for the supply of steam and talking to Ineos about the provision of electricity.”

There was growing concern among British gas traders that a Forties shutdown could have a knock-on effect on gas supplies from the North Sea.

The St Fergus gas terminal, which supplies about a third of the Britain's gas, feeds some hydrocarbon liquids extracted from the natural gas into the Forties pipeline system. ConocoPhillips said that gas production at its Britannia field would have to stop if the Forties system, into which Britannia feeds crude, were shut down.

Warnings from oil and gas producers were echoed in the transport industry. Some Scottish transport companies were being forced to buy bulk fuel supplies from Hull rather than Grangemouth, while individual hauliers had reportedly been refused permission to fill up at a succession of stations in the M6/M74 corridor.

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