Grangemouth set to cease refining operations as ‘major questions’ asked

GRANGEMOUTH refinery in Scotland could cease operations in 2025 and become a fuel import terminal or biorefinery, its owner Petroineos has announced, putting hundreds of jobs at risk.

Grangemouth is Scotland’s sole refinery, and one of only six in the UK, down from 12 in 2000. The refinery, which is part of a larger complex run by Ineos that also produces petrochemicals, employs around 400 people and its thought that only 100 workers would be needed to run a fuels terminal.

The company has said that the timescale for any operational change at the 150,000 bbl/d facility will be around 18 months, meaning refinery operations could cease as early as 2025.

Energy transition and biorefinery option

Franck Demay, CEO of Petroineos Refining, said: “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.”

He added that throughout the process, the company will remain focused on safe production and reliable supply of fuels to customers in Scotland, the north of England, and Northern Ireland.

In a statement, the company said it will look at a range of low-carbon opportunities for Grangemouth, including the feasibility of hosting a biorefinery at the site. It said it is working closely on this project with a range of interested parties including the Scottish and UK governments and will provide more information later. It will also work to convert its existing export terminal at Finnart on the Firth of Clyde, which is linked by pipeline to Grangemouth, into a diesel import facility.

UK refineries produce just 55% of the diesel used in the country with the rest imported, while the country produces 40% more petrol than is consumed. A report on the supply of road fuel in the UK published last year by the Competition and Markets Authority (CMA) warned that the UK faced stiff competition from abroad, with refining capacity in Asia, in particular, being increased. The CMA warned that the switch to electric vehicles is increasing the pressure on refiners and that the UK’s reliance on diesel imports brings resilience risks.

Reactions

Sharon Graham, general secretary of the Unite union, said: “This proposal clearly raises concerns for the livelihoods of our members but also poses major questions over energy supply and security going forward.”

 Her colleague Derek Thomson, the Unite Scottish secretary, 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.”

 A spokesperson for the trade group Fuels Industry UK said: “We are very sad to hear that Grangemouth refinery will be transitioning to a fuels terminal at some point in the future. As we have told government, the fuels sector is vital for the nation’s energy security and net zero ambitions but faces difficult business conditions in the UK. Government needs to deliver a globally competitive policy framework to support investment as well as a stable policy and fiscal environment that gives investors confidence.”

The Department for Energy Security and Net Zero said: “We understand that these reports will be concerning for the refinery’s workers and are seeking assurances from Grangemouth on how they are supporting employees and the long-term future of the site. We remain confident in our fuel supply and the government will continue to back the North Sea oil and gas sector and green industries, such as offshore wind, and carbon capture and storage, to protect our energy security, attract investment and create opportunities for communities in Scotland and across the UK.”

Speaking at the Chemical Industry Association last week, Ineos chair Tom Crotty decried the government’s lack of coherent energy policy and high North Sea oil taxes, warning it was disincentivising investment in the UK.

“The Forties Pipeline System moves 40% of the UK’s oil from the North Sea through Grangemouth where it is processed for distribution throughout the UK,” he said. “Oil flows through the system have declined by a dramatic 40%, meaning that the country is becoming ever more reliant on imported oil and gas.”

Ineos has caught wider public attention in recent months following news that billionaire owner Sir Jim Ratcliffe is nearing a £1.25bn (US$1.2bn) purchase of a 25% stake in Manchester United.

Just transition

The Scottish government has committed to achieve net zero by 2045 and to do so through a “just transition”, achieving a fairer, greener future for all and undertaken with the individuals, communities and businesses that are impacted.

Grangemouth began operations in 1924, and while Petroineos estimates that as Scotland’s largest industrial site it accounts for around 4% of Scottish GDP, the area remains among the 10% most deprived in Scotland. In evidence being given to the Economy and Fair Work Committee for its Grangemouth just transition enquiry published earlier this year, Malcolm Bennie of Falkirk Council said: “There is a tension between it being a place that is doing incredible commercially successful things and it having a community that is not benefiting from that.”

In September, the Scottish government published its own report on Grangemouth and the just transition, noting the facility “could influence the wider transition in deploying the highly skilled workforce, significant assets, and engineering heritage”. It set up a Grangemouth Future Industry Board to help take advantage of the opportunities at the site. The government has not responded to a request about what the closure would mean for it plans but it clearly scuppers the goal that “Grangemouth retains and develops its role as an integral part of the energy supply chain, enabling wider decarbonisation of eg the transport and industrial sectors, through production of climate compatible fuels”.

Grangemouth employs many process and chemical engineers directly and through its supply chains.

In October, IChemE hosted a just transition workshop with representatives from the institution’s member communities and from external organisations. The organisers are preparing a report with recommendations for IChemE’s Board of Trustees. These are expected to note the importance of education and reskilling of engineers so they can help develop and deploy cleaner technologies alongside the re-engineering of energy intensive processes so they are greener.