Grangemouth, Scotland’s last remaining oil refining capacity, could close as soon as 2025 amid a reported decline in North Sea oil output and falling demand for fuels.
Refinery operator Petroineos – a joint venture between PetroChina and Ineos – blamed market pressures and the energy transition for the decision.
It’s understood that around 400 jobs could be lost as a result. About 500 people are currently directly employed at the facility.
The company does not intend to shutter the site and will invest in a “resilient fuels import terminal” as part of an 18-month ‘refinery transition project’. This will make it possible to import petrol, diesel, aviation fuel and kerosene from vessels arriving via the Firth of Forth.
It said it would also progress work to convert its existing export terminal at Finnart on the Firth of Clyde – which is linked to Grangemouth by cross-country pipelines – into a diesel import facility.
With a refining capacity of 150,000 barrels per day it is one of six crude oil refineries in the UK and the only such asset in Scotland, reportedly supplying 80% of fuel north of the border.
PetroChina bought a 50% stake in the refinery from Ineos in 2011, and under the terms of this agreement the Chinese state-backed firm is understood to be responsible for most of the unit’s financing.
Falling Forties throughput
It follows a decline in flows through the Forties Pipeline System (FPS) – one of the main arteries of UK hydrocarbon infrastructure – which transports about 40% of UK North Sea oil and gas to shore and into the Ineos complex.
Ineos’ chairman Jim Ratcliffe took aim at UK politicians earlier this year over what he described as a “total lack” of energy policy, as flows through the pipeline have tailed off by a reported 40%.
Petroineos Refining chief executive Franck Demay, maintained it would be “business-as-usual” at the facility in the interim.
“As the energy transition gathers pace, this is a necessary step in adapting our business to reflect the decline in demand for the type of fuels we produce.
“As a prudent operator, we must plan accordingly but the precise timeline for implementing any change has yet to be determined.
“This is the start of a journey to transform our operation from one that manufactures fuel products, into a business that imports finished fuel products for onward distribution to customers.
“Throughout this process, our focus will remain on the safe production and reliable supply of high-quality fuels to our customers in Scotland, the north of England, and Northern Ireland.
“As we start to make this investment in preparing for a future transformation, we are equally committed to a regular programme of engagement with our colleagues about the changes we are making to our business.”
Other energy transition opportunities are also being considered for the site, the company has said, including a bio-refinery.
Petroineos says it is working closely on these projects with a “range of interested parties”, including the Scottish and UK governments, and said it would provide more information in due course.
Ineos – which wholly operates other facilities at the complex which produce plastics and petrochemicals and employ a further 1,500 people – said it supported the plans.
An Ineos spokesman added: “The co-location of their operations with ours and the close knit relationship between businesses means that we are fully aware of these plans.
“We remain wholly supportive of Petroineos, where it remains business as usual for refinery operations and our various relationships/interactions with the refinery.”
‘Opposite of just transition’
Green MSP for Central Scotland Gillian Mackay said the decision was the “the opposite of a just transition”, and said she had reached out to trade unions to offer support
This is the opposite of a just transition.
My solidarity is with the workers, their families and the community in Grangemouth who will be concerned about what this means for the future.
I have reached out to trade unions to offer my support. https://t.co/snUr6exfGD
— Gillian Mackay MSP (@GillianMacMSP) November 22, 2023
Unite the Union said it continues to engage with Petroineos and urged other stakeholders to do the same due to the implications the proposal has for the UK and Scottish economies.
Unite general secretary Sharon Graham, said: “This proposal clearly raises concerns for the livelihoods of our members but also poses major questions over energy supply and security going forward. Unite will leave no stone unturned in the fight for jobs and will hold politicians to account for their actions.”
Unite Scottish secretary Derek Thomson added: “Every option must be on the table in order to secure the hundreds of highly skilled jobs based at the Grangemouth complex for the long-term.”
Scottish Conservatives net zero spokesman Douglas Lumsden, said the “hostile attitude” shown by the Scottish Government and the UK Labour Party towards oil and gas “will have been a factor” in the decision, although it is unclear if this is the case.
“They all fail to recognise the need for oil and gas – such as the refinery at Grangemouth – to be part of Scotland and the UK’s energy mix for years to come,” he said.
“Instead, the highly skilled workforce at Grangemouth have been delivered the worst possible news at a difficult time.
“The SNP-Green Government must act now.
“We have requested an urgent statement from ministers today in the Scottish Parliament to outline what this will mean for workers and what decisive action will be taken to support them.”