The closure of Scotland’s last oil refinery, Grangemouth, slated for 2024, threatens 400 jobs and heightens the UK’s dependency on imported fuel.
Petroineos, a joint venture between Ineos and PetroChina, has announced the closure of the Grangemouth oil refinery, citing declining domestic demand for motor fuels, partly due to the impending ban on new petrol and diesel cars. Frank Demay, Chief Executive at Petroineos Refining, has noted that the demand for key fuels produced at Grangemouth has already begun to diminish. Mr Demay stated, “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.” Additionally, the maintenance costs of the nearly century-old refinery played a significant role in the decision.
Political leaders and unions have criticised the move, with UK Energy Secretary Ed Miliband expressing profound disappointment. Gillian Martin, his Scottish counterpart, alongside union leaders, condemned the closure as “industrial vandalism.” Currently, Grangemouth contributes roughly 14% of the UK’s overall refining capacity, supplying motor fuels and other products across Scotland and northern England. Although 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 faced significant financial challenges, accumulating losses of $775 million since 2011, despite a $1.2 billion investment. The ageing infrastructure, initially commissioned in 1924, is less efficient compared to overseas competitors and requires an additional £40 million to remain operational beyond next spring. Approximately 75 workers will stay to operate the new terminal, while up to 280 jobs will be lost within three months of the closure. Another 100 employees will stay for up to a year to commence decommissioning, with a small number remaining longer for further decommissioning and demolition efforts.
Both the UK and Scottish governments have initiated studies to explore potential future uses for the refinery site, considering alternatives like hydrogen, biofuels, and sustainable aviation fuel. However, these alternatives are unlikely to be implemented before the refinery shuts down. In response, the governments have launched 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 is also exploring the use of its National Wealth Fund to support alternative site uses.
The closure is expected to significantly impact the wider economy, affecting numerous small businesses dependent on the refinery. Hisashi Kuboyama from the Federation of Small Businesses in Scotland has warned of the broader consequences, noting 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 secure the workforce until alternative employment opportunities are established. She remarked, “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.”
The decision to close the refinery does not directly impact other petrochemical operations at the Grangemouth complex, which will continue to operate. Nevertheless, the closure signifies a major 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 in the UK’s energy landscape, reflecting broader economic and environmental shifts. While efforts are being made to mitigate the impact, the decision highlights critical challenges for workers, small businesses, and the nation’s fuel security.
