Scotland’s only oil refinery to close next year, 400 jobs to go

Published : 4 weeks ago, on 12/09/2024

By Ron Bousso and Robert Harvey

LONDON (Reuters) -Grangemouth, Scotland’s only oil refinery, is to close in 2025 with the loss of 400 jobs, operator Petroineos said on Thursday, as part of plans to turn the 100-year old plant into a fuels import terminal.

Petroineos said last November it was preparing to shut Grangemouth, Britain’s oldest refinery. Production will cease in the second quarter of next year, subject to an employee consultation, a company spokesperson said.

The decision was criticised by trade unions and politicians.

“It is deeply disappointing that Petroineos have confirmed their previous decision to close Grangemouth oil refinery,” UK Energy Secretary Ed Miliband said.

The site will become an import and distribution terminal for finished fuels, which will cut the number of employees at the site from 475 to around 75 over the next two years.

Petroineos is a joint venture between PetroChina International London (PCIL) and INEOS Group, a British chemicals firm founded by billionaire Sir Jim Ratcliffe.

The company cited economic difficulties as the reason for the closure, stating that the company had invested $1.2 billion since 2011, and returned losses in excess of $775 million over the same period.

“Grangemouth is increasingly unable to compete with bigger, more modern and efficient sites in the Middle East, Asia and Africa. Due to its size and configuration, Grangemouth incurs high levels of capital expenditure each year just to maintain its licence to operate,” the company said.

It said the plant is currently losing around $500,000 per day, and expects to see a $200 million loss for 2024.

Petroineos’s plans for Grangemouth had been opposed by trade unions and local politicians and there were campaigns to extend production until a low-carbon alternative for its long-term future could be secured.

The UK and Scottish governments announced a joint plan on Thursday, including a 100 million pound ($130.43 million) financial package, to secure an industrial future for Grangemouth after the refinery closes.

This will go towards career support for affected workers as well as investments in local energy projects.

“We are announcing a package of investment to help the workforce find good, alternative jobs, invest in the community and serve a viable industrial future for the Grangemouth site,” Miliband said.

Trade union Unite, which represents workers at Grangemouth, described the closure as an “act of industrial vandalism.”

“The complex is critical to the nation’s manufacturing base and energy security,” Unite Scottish secretary Derek Thomson said.

SHRINKING MARKET

Frank Demay, chief executive of Petroineos Refining, said demand for the fuels produced at Grangemouth had already started to decline.

“With a ban on new petrol and diesel cars due to come into force within the next decade, we foresee that the market for those fuels will shrink further,” he said.

The refinery processes mainly North Sea Forties crude oil, which it has a direct link to via the Forties Pipeline System (FPS), and U.S. WTI Midland.

Both of those crude oil grades help to underpin the Brent global oil benchmark, meaning the refinery’s closure could have wider significance for the oil market.

Ineos said it is “business as usual” for its other operations around the Grangemouth site, namely the Ineos Olefins and Polymers petrochemical plant and the FPS.

The new Labour government has previously committed funding to look into possible low-carbon projects at the site. The research has identified three possible long-term options, including low-carbon hydrogen, clean eFuels and sustainable aviation fuels.

Unite said it is in talks with the government about the site, including the potential for sustainable aviation fuel production.

($1 = 0.7667 pounds)

(Reporting by Ron Bousso and Robert Harvey in London; Editing by Kevin Liffey and Jane Merriman)