Grangemouth's flames won't seem as bright amid anxiety over future of Petroineos refinery

For almost 100 years, Grangemouth has been synonymous with flames, steam and smoke rising into the air from the town’s oil refinery.

Established in 1924, it has powered Scotland for decades, provided jobs to thousands of people in the oil and gas sector, and generated billions of pounds for the Scottish economy.

But as the world continues its transition to a net zero future and governments focus on energy diversification, the future of Petroineos’ plant at Grangemouth has started to look very uncertain.

There was widespread shock among locals after the company announced on Wednesday that operations at Grangemouth – Scotland’s sole oil refinery – are to cease in 2025 and the site will transition into a fuel import terminal.

Generations of families from the Falkirk area and beyond have worked at the refinery since it was built in the 1920s.

Employees at the oil refinery received an e-mail from bosses on Tuesday informing them it could cease operations as early as 2025.

Petroineos says it’s facing a future of unsustainable losses and it’s planning to turn the refinery into a fuel import and distribution terminal.

But what this means for the hundreds of people that work there is unclear.

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Scotland Tonight analysis: The impact of Grangemouth refinery closure

Grangemouth provides aviation fuel for Scotland’s major airports – Glasgow, Edinburgh and Prestwick – and is a major supplier of petrol and diesel ground fuels across the country’s central belt.

The establishment of BP’s Forties Pipeline System, which transports oil directly to the complex, has been crucial to Grangemouth’s recent operations.

It currently has the capacity to produce around seven million tonnes of fuels and 1.4 million tonnes of petrochemicals every year. Some 80% of Scotland’s fuel is supplied by the Grangemouth crude oil refinery.

Origins

The origin of Ineos’ operations at Grangemouth can be traced as far back as 1850, when Glasgow scientist Dr James ‘Paraffin’ Young took out a patent for ‘treating bituminous coals to obtain paraffine therefrom’.

The first oil works in the world were opened in Bathgate in 1851, producing oil from shale or coal.

In 1859, the world’s first oil well was sunk in Pennsylvania in the United States and, as the price of oil dropped, many Scottish works closed or concentrated production on lubricants, paraffin wax and sulphate of ammonia.

By 1919 the six surviving companies, including Young’s Paraffin Light and Mineral Oil Company Limited, came together under the management of the newly formed Scottish Oils.

In the same year, Scottish Oils was acquired by the Anglo-Persian Oil Company, later to become BP.

BP was persuaded by Scottish Oils to locate a refinery near Grangemouth, rather than in north-east England, because of its flat ground to the east, its transport links and, most importantly, the rich vein of labour skilled in shale oil refining.

By 1924, the refinery was in operation. It maintained a throughput of 360,000 tonnes per year until the outbreak of war in 1939 when imports of oil dwindled and forced it to close.

The refinery re-opened in 1946 to a world even more hungry for refined oil products. This demand, coupled with economic reasons, made it essential that the crude oil was utilised completely, and this led to the growth of the petrochemical industry.

But the world is now grappling with another major energy shift as a result of climate change.

Decarbonisation

The Scottish Government has committed to a target of net-zero greenhouse gas emissions by 2045. It has been looking at how to decarbonise the energy industry, without sacrificing jobs.

Grangemouth is a massive polluter – accounting for 9% of Scotland’s total emissions.

While environmental activists have been campaigning for the closure of the site – they say it’s being handled irresponsibly.

Rosie Hampton, just transition campaigner at Friends of the Earth Scotland, said: “Workers at Grangemouth ultimately deserve far better than how they have been treated today by faraway bosses in distant boardrooms, who have not consulted them at all about their future.

“Escalating climate breakdown means a transition away from fossil fuels is essential, so this sort of transition process is inevitable and it’s a real shame that the Scottish Government and Ineos have not brought workers and trade unions around the table to have a say in what is a vital discussion.”

As part of the energy transition, the UK Government announced earlier this month it will award licences for oil and gas projects in the North Sea annually.

Legislation set out in the King’s Speech requires the North Sea Transition Authority (NSTA) to invite applications for new production license on an annual basis to “safeguard the prosperity of our country”.

Union vow to save jobs

Trade union Unite has said it will “leave no stone unturned” in its fight to save jobs at Grangemouth.

Derek Thomson, Unite Scottish secretary, told STV News: “The news will come as a shock to the local community but Unite is going to do everything it can to protect jobs in this vital industry

“We need more proposals and we want to work with the Scottish Government and the UK Government to come to some sort of conclusion as to where this will end up.”

Petroineos said around 500 workers are employed at the site and a number of employees will remain following the move to an import-only terminal.

The firm is also currently assessing a number of green opportunities for the site, it has said, including a bio-refinery.

Franck Demay, chief executive at Petroineos Refining, said: “This does not change anything for our operation today, where it is business-as-usual at the Grangemouth refinery.

“We currently anticipate continuing refinery operations until spring 2025.”

He added: “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.”

What has been the political reaction?

First Minister Humza Yousaf said it’s unclear what the future will look like at the site.

“We don’t have a hostility to the oil and gas industry,” he told STV News, “Of course, it is an industry that we value and have valued for many, many years and, of course, decisions over oil and gas licences are made by the UK (Government).”

“It is fair to say though, given the extent of the climate crisis that we are seeing unfolding in front of us, that we all want to transition towards a net zero economy – that has to be a just transition and the key word in that is just because we want to take every single worker along with us.”

Douglas Lumsden, Scottish Conservative MSP for north-east Scotland, said he was feeling shocked, saddened and angry by the news.

“There is an outright hostility by the SNP-Green government towards oil and gas, so if I was Ineos and I had a refinery in Scotland, I would be thinking ‘well, what is the future here when we’re not wanted in this part of the UK’.

“I think the blame for this has got to be firmly at the door of the SNP-Green government.

“While we’ve still got a need for oil and gas it’s much better that we produce it in this country – it’s much better for our economy and much better for our jobs.

“In terms of what we’ve heard from Ineos today, it’s going to be a hammer blow for the Scottish economy – they play a huge part in the Scottish economy and that’s just going to be wiped out.”

Ineos' decision will have a knock-on effect across Grangemouth. — Ineos’ decision will have a knock-on effect across Grangemouth. STV News

Scottish Green MSP Gillian Mackay is calling for an “urgent summit” on the issue, saying: “This is an appalling way to treat workers who only months ago were being promised that they would be part of a just transition for the site. Instead they are being told their jobs are at risk just weeks before Christmas.

“Sir Jim Ratcliffe and his executives must explain themselves to the community that has for 100 years worked and loyally supported this site, and fully expected a better and more sustainable future that would support generations more.

“I grew up less than 200 yards from the plant and I can tell you right now that workers at the plant are bewildered, betrayed and furious at finding out about this from a story on the internet long after shareholders were made aware.

“They have been given next to no information – in fact, I broke the news to one senior union official.”

Scottish Liberal Democrat economy spokesman Willie Rennie called on the UK and Scottish governments to “step up”.

He said: “This is a dark day for the workers at Grangemouth.

“If the ‘just transition’ is to be more than just a slogan, it must deliver a future for the workers and for the Grangemouth site.

“The Scottish and UK Governments must step up now.”

A spokesperson for the UK Government’s 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.”

Ineos founder Ratcliffe turns attention from energy to football

Petroineos was formed in 2011 between state-owned Chinese oil giant PetroChina and Ineos, part of billionaire Sir Jim Ratcliffe’s petrochemical empire.

Last month, Ratcliffe hit out at what he sees as the UK’s “total lack” of an energy policy, which he branded “completely irresponsible”.

The billionaire owner of the chemicals group accused the UK Government of seeking to discourage local oil and gas production and making the country reliant on supplies from overseas producers.

He made the remarks as he revealed his company’s Forties Pipeline System has seen North Sea oil flows drop by 40% over the last six years.

Ineos has been forced to close a third of the system’s processing capacity as a result of the recent reduction in oil flow, Ratcliffe said, potentially threatening hundreds of jobs that depend on it.

He blamed the decline on a combination of windfall taxes and “negative signals” he claims politicians have been making about the future of the North Sea in recent times.

Sir Jim argued the “worrying” decline puts UK consumers “at the mercy” of foreign producers and is causing huge volatility in energy prices, pushing ever increasing numbers of people into fuel poverty.

He is understood to be on the verge of a £1.25bn deal to secure a 25% stake in Manchester United, but sources have indicated that an announcement may not come now until next week.

Ratcliffe is set to acquire significant control of football operations at United as part of his investment when it is ultimately confirmed, while it has also been reported that he would provide an additional £245m to upgrade club infrastructure.

Insight Colin Mackay Political Editor

Both governments pledging to work together here but there is also some politics at play around this – opposition parties blaming the Scottish Government, some also attacking Petroineos.

The company says the economic reality is that “Grangemouth is unable to compete with more modern and efficient refineries in the Middle East, Asia and Africa”.

Most countries import refined oil, rather than refining their own – but then most countries aren’t oil producers, and this will raise questions about fuel security.

But it’s not the end of the oil industry in Grangemouth. Ineos plan to continue importing and distributing oil through Grangemouth.

So the Forties pipeline will continue – and the flare stacks will continue to burn – they are one of the biggest industrial landmarks left in central Scotland.

But with the loss of the refinery – the loss of hundreds of jobs from Scotland’s biggest manufacturing site – it might not feel like they are burning quite so brightly.