Scotland’s last remaining oil refinery at Grangemouth will close between April and June next year, resulting in the loss of 400 jobs and leaving Britain with just a handful of refineries.
The closure, announced by Petroineos – a joint venture between Sir Jim Ratcliffe’s Ineos and PetroChina – comes at a time when domestic demand for motor fuels is declining, exacerbated by the upcoming ban on new petrol and diesel cars.
Frank Demay, Chief Executive at Petroineos Refining, said demand for key fuels produced at Grangemouth has already begun to decline. “With a ban on new petrol and diesel cars coming into effect within the next ten years, we expect the market for these fuels to shrink,” Demay said. The company cited the cost of maintaining a refinery built nearly a century ago as a major factor in the decision.
The announcement has sparked criticism from political leaders and unions. British Energy Secretary Ed Miliband expressed deep disappointment, while his Scottish counterpart Gillian Martin and union leaders condemned the decision as ‘industrial vandalism’. Grangemouth currently accounts for around 14% of Britain’s total refining capacity, supplying motor fuels and other products throughout Scotland and northern England. Although Britain remains a net exporter of petrol, it is dependent on imports of diesel and jet fuel.
To mitigate the impact of the closure, Petroineos plans to establish an import and export fuel terminal at the site, ensuring supply to gas stations and other customers. The refinery has faced ongoing financial challenges, with accumulated losses of $775 million since 2011, despite a $1.2 billion investment. The outdated infrastructure, originally opened in 1924, is less efficient than that of foreign competitors and will require a further £40 million to remain operational beyond next spring.
About 75 employees will stay on to operate the new terminal, while up to 280 jobs will be lost in the three months following its closure. Another 100 employees will stay on for another year to begin dismantling, while a small number will stay longer to oversee further dismantling and demolition efforts.
The British and Scottish governments have commissioned studies to investigate possible future applications of the refinery, with options including hydrogen, biofuels and sustainable aviation fuel. However, it is unlikely that these alternatives will be implemented before the refinery is closed. In response, the governments have announced a joint investment plan, adding £20 million to the previously announced £80 million Falkirk and Grangemouth Growth Deal, aimed at funding new growth projects in the area. The UK government also plans to explore the use of its National Wealth Fund to support alternative uses for the refinery site.
The closure is expected to have significant impacts on the broader economy, impacting numerous small businesses that rely on the refinery. Hisashi Kuboyama of the Federation of Small Businesses in Scotland highlighted the wider implications, warning that “the knock-on effect on the supply chain will impact countless small businesses across the length and breadth of the country, creating many more jobs “than the 400 people on site are in danger.”
Sharon Graham, general secretary of the Unite union, criticized both Petroineos and politicians for failing to protect the workforce until alternative employment opportunities were secured. “This dedicated workforce has been let down by Petroineos and by the politicians at Westminster and Holyrood, who have failed to guarantee production until alternative jobs are in place,” Graham said. She called on the Labor government to demonstrate its commitment to workers and communities, adding: “The path to net zero cannot be paid for with worker jobs.”
The decision to close the refinery will not directly impact other petrochemical activities at the Grangemouth complex, which will continue to operate. However, the closure marks a significant shift in the UK’s energy landscape, further increasing the country’s dependence on imported fuels and raising questions about the future of the site and the community that depends on it.