Scotland's Last Oil Refinery to Close

Grangemouth, Scotland's sole oil refinery, is set to close by the summer of next year, with 400 jobs expected to be lost. Petroineos, the company behind the refinery, announced that it could no longer compete with more modern sites in Asia, Africa, and the Middle East.

Shift to Import Terminal

In an effort to ensure a continued fuel supply for Scotland, Petroineos plans to convert the Grangemouth site into a terminal that will import petrol, diesel, aviation fuel, and kerosene. However, this transition will drastically reduce the workforce, retaining fewer than 100 employees compared to the current 475.

Although the company made their intentions clear last November, union leaders had hoped for an extended period to explore green alternatives that could potentially keep the site open.

Financial Struggles Behind the Decision

The refinery, one of the oldest in the UK, has faced significant financial difficulties. Reports indicate that it is currently losing around $500,000 (£383,000) per day, with projected losses of $200m (£153m) in 2024. Petroineos has stated that they expect the new import hub to be operational by early summer next year.

Reactions from Officials and Workers

The news has been met with disappointment from both the workforce and government officials. First Minister John Swinney expressed his deep disappointment, while a joint plan from the Scottish and UK governments was unveiled to address the site's future. Workers, on the other hand, described the announcement as a "kick in the teeth," with unions calling it a "terrible indictment" of both the company and the governments involved.

The refinery, opened in 1924 by BP, has long played a crucial role in Scotland’s economy, supplying aviation fuel to major airports and providing petrol and diesel across the Central Belt. It also accounts for around 14% of the UK’s refining capacity and meets 65% of Scotland’s demand for refined oil products.

Challenges of Maintaining an Outdated Facility

Petroineos explained that the sheer size of the Grangemouth site necessitated high levels of capital expenditure, which outweighed its profits. CEO Frank Demay acknowledged that demand for key fuels produced at Grangemouth, such as petrol and diesel, is already in decline. With bans on new petrol and diesel cars on the horizon, the market for these fuels is expected to shrink even further.

Demay stated that the decision to create an import terminal is intended to safeguard Scotland’s fuel supply, with plans to have Grangemouth ready to function as a national distribution hub by the second quarter of next year.

Job Redundancies and Future Plans

Most of the redundancies, estimated to be between 250 and 280, will occur within three months of the plant’s closure. Around 100 workers will remain for six to 12 months to assist in the decommissioning process and the development of the import business. A smaller team will work on decommissioning and demolition until 2030.

In addition, 20 jobs will be lost at Finnart on Loch Long, a key pipeline terminal for crude oil from the Gulf of Mexico and South America.

Government Action and Unions' Response

Workers protested against the planned closure earlier this year, but despite the march and ongoing negotiations, no alternative plans have yet emerged to save the jobs. The Scottish government has committed to working closely with the UK government on an investment plan aimed at securing the site's industrial future. A £100m fund has been promised to support local energy projects, with further studies, like Project Willow, exploring the possibility of creating a new long-term industry at the Grangemouth site.

However, it’s clear that these plans will not come in time to save the hundreds of jobs that are expected to disappear next year.

Energy Transition and Environmental Concerns

Petroineos has invested heavily in Grangemouth over the years, putting over $1.2bn (£900m) into the site since 2011, despite recording significant losses during the same period. The company also faced pressure to decide whether to invest in renewing a licence for its crude distillation unit, which would have required a £40m investment – a daunting prospect given the scale of the plant's ongoing losses.

Union leaders have voiced their frustration at what they see as a lack of government planning, with Derek Thompson of Unite describing the decision as a "devastating blow" for the local community.

Environmental and Strategic Considerations

While the closure of Grangemouth might be welcomed from an environmental standpoint – reducing oil refining in line with climate change targets – it raises concerns about energy security. The plant, owned in part by PetroChina, a company with close ties to the Chinese government, has been a key asset for Scotland’s energy supply.

A long-term solution involving biofuels or hydrogen production could potentially take Grangemouth into a greener future, but such technologies are still far on the horizon. For now, the loss of 400 jobs and the economic impact on the surrounding area remains the immediate concern.

In conclusion, the transition from fossil fuels will continue to cause disruption for workers, and the green alternatives currently available require fewer employees. The development of new markets for biofuels and sustainable energy needs better forward planning and investment from both the UK government and private sector stakeholders.