The Grangemouth oil refinery, Scotland’s last remaining oil refinery, is set to close in 2024. This decision will lead to 400 job losses and increase the UK’s reliance on imported fuel.
The closure, announced by Petroineos, a joint venture between Sir Jim Ratcliffe’s company and PetroChina, comes as domestic demand for motor fuels declines. This trend is exacerbated by the upcoming ban on new petrol and diesel cars. Frank Demay, Chief Executive at Petroineos Refining, noted that the demand for key fuels produced at Grangemouth has already started to diminish. “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,” Demay stated.
The company cited the substantial costs of maintaining a refinery built nearly a century ago as a critical factor in the decision. Political leaders and unions have criticised the announcement. UK Energy Secretary Ed Miliband expressed deep disappointment, and his Scottish counterpart, Gillian Martin, along with union leaders, condemned the decision as “industrial vandalism.”
Grangemouth accounts for about 14% of the UK’s overall refining capacity, supplying motor fuels and other products across Scotland and northern England. While the UK remains a net exporter of petrol, it relies heavily on imports for diesel and jet fuel. To mitigate the closure’s impact, Petroineos plans to establish an import and export fuel terminal at the site, ensuring continued supply to forecourts and other customers.
The refinery has struggled financially, accumulating losses of $775 million since 2011, despite a $1.2 billion investment. The ageing infrastructure, opened in 1924, is less efficient than overseas competitors and requires an additional £40 million to remain operational beyond next spring. Approximately 75 workers will continue to operate the new terminal, while up to 280 jobs will be lost in the three months following the closure. Another 100 employees will remain for up to a year to begin decommissioning, with a small number staying on longer to oversee further decommissioning and demolition efforts.
The UK and Scottish governments have commissioned studies to explore potential future uses for the refinery, considering options such as hydrogen, biofuels, and sustainable aviation fuel. However, these alternatives are unlikely to be implemented before the refinery shuts down. 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 using its National Wealth Fund to support alternative uses for the refinery site.
The closure is expected to have significant ripple effects on the wider economy, impacting numerous small businesses reliant on the refinery. Hisashi Kuboyama from the Federation of Small Businesses in Scotland highlighted the broader consequences, warning that “the knock-on effect on the supply chain will have an impact on numerous small businesses across the length and breadth of the country, putting many more jobs than the 400 on site at risk.”
Sharon Graham, General Secretary of the Unite union, criticised both Petroineos and politicians for failing to safeguard the workforce until alternative employment opportunities are secured. “This dedicated workforce has been let down by Petroineos and by the politicians in Westminster and Holyrood who have failed to guarantee production until alternative jobs are in place,” Graham said. She urged the Labour government to demonstrate its commitment to workers and communities, adding, “The road to net zero cannot be paid for with workers’ jobs.”
The decision to close the refinery does not directly impact other petrochemical operations at the Grangemouth complex, which will continue to function. However, the closure represents a significant shift in the UK’s energy landscape, further increasing the nation’s reliance on imported fuels and raising questions about the future of the site and the community that depends on it.
The closure of the Grangemouth oil refinery marks a pivotal moment for the UK’s energy sector, with significant implications for the local workforce and economy. The transition away from fossil fuels, while necessary, underscores the importance of ensuring that workers and communities are not left behind.