Scotland’s last oil refinery at Grangemouth is due to close between April and June next year, costing 400 jobs and leaving the UK with just a handful of refineries.
The closure, announced by Petronews – a joint venture between Sir Jim Ratcliffe’s Ineos and PetroChina – comes as domestic demand for motor fuels slumps, exacerbated by a coming ban on new petrol and diesel cars.
Frank Demay, chief executive of Petronius Refining, said demand for the main fuel produced at Grangemouth was already starting to decline. “With a ban on new petrol and diesel vehicles over the next decade, 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 factor in the decision.
The announcement has drawn criticism from political leaders and unions. UK Energy Secretary Ed Miliband expressed deep disappointment, while his Scottish counterpart Gillian Martin and union leaders condemned the decision as “industrial sabotage”. Grangemouth currently accounts for around 14% of the UK’s total refining capacity, supplying motor fuel and other products to Scotland and the north of England. Although the UK remains a net exporter of petrol, it relies on imports of diesel and jet fuel.
To mitigate the impact of the closure, Petronas plans to build a fuel import and export terminal on the site, ensuring continued supply to petrol stations and other customers. The refinery has faced ongoing financial challenges, racking up losses of $775 million since 2011 despite $1.2 billion in investment. The refinery’s ageing infrastructure, which originally opened in 1924, is less efficient than that of overseas competitors and will require an additional £40 million to keep it running beyond next spring.
About 75 workers will remain at the new plant to operate it, while up to 280 jobs will be lost in the three months following the closure. Another 100 employees will stay for up to a year to begin the decommissioning process, with a few staying longer to oversee further decommissioning and demolition efforts.
The UK and Scottish governments have commissioned studies to explore potential future uses for the refinery, with options including hydrogen, biofuels and sustainable aviation fuel. However, these alternatives are unlikely to be implemented before the refinery closes. In response, the two governments have announced a joint investment plan, adding £20m to the previously announced £80m Falkirk and Grangemouth Growth Deal, to fund new growth projects in the area. The UK government also plans to explore using the National Wealth Fund to support alternative uses for the refinery site.
The closure is expected to have a significant impact on the wider economy, affecting many small businesses that rely on the refinery. Hisashi Kuboyama of the Federation of Small Businesses in Scotland highlighted the wider implications, warning that “the cascading impact on the supply chain will have an impact on many small businesses across the country, putting many more jobs than the 400 at the site at risk.”
Unite general secretary Sharon Graham criticised both Petronius and politicians for failing to protect workers until alternative jobs were secured. “Petronius and politicians in Westminster and Holyrood have failed this loyal workforce by failing to ensure production until alternative jobs are secured,” Graham said. She called on 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 operate. However, the closure represents a major shift in the UK’s energy landscape, increasing the nation’s reliance on imported fuels and raising questions about the future of the site and the communities that rely on it.
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