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‘Devastating’: Anger as 100s of jobs at risk as Scotland’s only oil refinery to shut

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Staff have been told that a start has already been made on projects that will see the Petroineos plant transition from a refinery to potentially an imported fuels depot.

Petroineos told the Herald it will remain a refinery until spring 2025 although managers have indicated to staff the transition  would take place over the next five years.   

READ MORE: Grangemouth union battle – and how Radcliffe won last time round

They say the move will provide “greater operational flexibility and safeguard the site as a national fuel hub for decades to come”.

The preparatory work is expected to make it possible to import petrol, diesel, aviation fuel and kerosene into Scotland from vessels arriving via the Firth of Forth.
Grangemouth’s place in the chemical and oil industries goes back more than a century.

The refinery at Grangemouth, one of only six remaining in the UK, has been operating since 1919 and was one of the first to transform crude oil in the UK.

It produces a range of fuels including petrol, diesel, kerosene, LPG and jet fuel and currently employs around 500.

Petroineos estimated the refinery is responsible for 4% of Scotland’s gross domestic product and responsible for approximately 8% of the nation’s manufacturing base. It is the primary supplier of aviation fuel for Scotland’s main airports, and a major supplier of petrol and diesel ground fuels across the central belt

According to Petroineos, it has a refining capacity of 150,000 barrels per day while Grangemouth plays a leading role in supplying Scotland’s fuel demand, and is of strategic importance to the nation’s energy supply and regional economic development.

It is connected to the Forties Pipeline System (FPS) for its crude oil intake from the North Sea and connected to Finnart Ocean Terminal for crude oil import and finished products export.

The refinery, which the joint venture between Ineos Group and China’s state-backed PetroChina bought in 2005, has long been seen as vulnerable to cuts given its age.

The Herald: Grangemouth oil refinery

One specialist staff member told the Herald: “The refinery employs around 600 direct staff, plus agency and contractors on top of that. What will happen will shed hundreds of those jobs.

“It means the end of crude oil refining at Grangemouth and in Scotland. It will simply be an import, storage and distribution terminal.

“A  fuels terminal would require much less people to run, but it is unclear at present how many.  We have no clear ideas of numbers, just that redundancies would occur.

“The concern is over the 100s of redundancies which will inevitably occur sometime between the second quarter of  2025 and first quarter 2027, plus all the uncertainty of what the future holds.   If the business remains viable until then this will require some retention of existing skilled staff to enable the refinery to last.

“The other point of view is energy security, as Scotland’s only manufacturer of transport and heating fuels closes. Energy security for the UK should still be covered by the remaining refineries.

“The other concern is impact on local economy, as the main employer in the Falkirk area significantly downsizes with impact on all supporting businesses.”

Another member of staff told us: “The news is devastating.  The timescales are difficult to work out but there are clearly fears for jobs here.”

In November, 2020 it emerged that two production plants at the site, which had not been operational since the Covid lockdown the previous March were being mothballed.

It said the move will reduce future operating costs at the site.

A few months earlier, the energy firm jointly owned by the Ineos Group and Chinese company PetroChina sought a government loan package worth hundreds of millions of pounds amid low oil demand which was triggered by the coronavirus pandemic.

The request for the joint venture’s loan followed Ineos owner Sir Jim Ratcliffe’s move to Monaco for what were alleged to be tax reasons.

It is understood Petroineos had been in talks for weeks with the Scottish and UK governments about a loan package.

Ineos said at the time: “It should not come as any surprise that the refinery is talking to the government at a time when demand for fuel has fallen significantly during the period of lockdown,” before adding that “the request is not from Ineos but from Petroineos, a 50-50 joint venture between Ineos and Petrochina”.

Along with its other site in Lavera, France, Ineos and PetroChina, was processing at the time 420,000 barrels of crude oil per day and 19 million tonnes of oil products per year.

The joint-venture believed it could have “a viable longer-term business” employing up to 450 workers at the site. In 2020 there were 637 full-time staff there.

It was said that the shutting down of the two affected parts of the Grangemouth refinery – the Crude Distillation Unit 1 and the Fluidised Catalytic Cracker Unit (FCCU) – will have the impact of reducing CO2 emissions there by 500,000 tonnes a year.

At the time, Scotland’s infrastructure secretary Michael Matheson described the job losses as “devastating” and vowed the Scottish Government would do everything it could to help affected employees.

News of the future of the plant came in a message to staff from refinery manager, Russell Mann.

He said:  “We have been asked by our shareholders to start progress on a couple of logistics projects which will ultimately allow us to transition from a fuels refinery in Grangemouth to the option of importing fuels.

The Herald:

“So we will have people on site shortly at Finnart and the Kinneil tankage area in the refinery tank farm, looking at these projects and both myself and the management team at Grangemouth think it’s very important that we keep everybody in the loop, that we don’t try and do this behind people’s backs, that people know what is going on.

“The timing is a little unfortunate. We have been working on this for a number of months and the concept of Grangemouth transitioning to a terminal is something that we’ve been looking at for at least 20 years, to the best of my knowledge.  So this isn’t actually related to anything short term.

“The sort of timescale we have in mind for these logistics projects is about 18 months. That’ll take us through to [the second quarter of 2025]  or thereabouts.

“I would look at today as indicating it’s a ‘when’ rather than an ‘if’ we transition. We don’t have an actual date for the transition.  It will be driven by the margins which currently are reasonably good.

“Ultimately this transition, this decision is going to be driven by those large external factors rather than anything local to Grangemouth.

“I think everybody is aware that the demand for our products is diminishing and has been for years and at the moment we have an up-kick in margins on the back of what’s going on in Ukraine but that won’t last forever.

“And it’s fair to say a European refinery such as Grangemouth, where we’re getting squeezed from the US and Far  East, Middle East, that some time in the next five years or so it simply won’t make economic sense to run this as a main fuels refinery.

“Ultimately the market in Scotland simply won’t be big enough to support a fuels refinery and we would be better  off transitioning to an import terminal at that point.”

Petroineos said it will take 18 months for the preparatory work to transition the refinery into a fuels import terminal to complete.

It said the timescale  for any operational change has not yet been determined but the refinery would continue operating until Spring 2025.

The company said: “Grangemouth is home to the only fuels refinery in Scotland, which has been a vital piece of national infrastructure for the past century but faces significant challenges due to global market pressures and the energy transition.”

It said the company will also progress work to enable the conversion of its existing export terminal at Finnart on the Firth of Clyde – which is linked to Grangemouth by cross-country pipelines – into a diesel import facility.

“Once a decision is taken to commission the new infrastructure, Petroineos will have the means of importing finished fuels for onward distribution to customers around the country through its established supply networks,” it said.

Franck Demay, Petroineos Refining chief executive 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.

“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. As a prudent operator, we must plan accordingly, but the precise timeline for implementing any change has yet to be determined.

The Herald:

“This is the start of a journey to transform our operation from one that manufactures fuel products, into a business that imports finished fuel products for onward distribution to customers.

“Throughout this process, our focus will remain on the safe production and reliable supply of high-quality fuels to our customers in Scotland, the north of England, and Northern Ireland.

“As we start to make this investment in preparing for a future transformation, we are equally committed to a regular programme of engagement with our colleagues about the changes we are making to our business.”

As part of of the plans communicated to staff, Petroineos is also evaluating a range of low-carbon opportunities for Grangemouth, including the feasibility of a bio-refinery facility on the site. The company is working closely on this project with a range of interested parties, including the Scottish and UK governments.

The union Unite, said it is engaging with Petroineos and urged other stakeholders such as the Scottish and UK governments to do the same “due to the implications” which the proposal has for the economies of the devolved and reserved administrations.

Sharon Graham, Unite general secretary, said: “This proposal clearly raises concerns for the livelihoods of our members but also poses major questions over energy supply and security going forward. Unite will leave no stone unturned in the fight for jobs and will hold politicians to account for their actions.”

The Herald:

Derek Thomson, Unite Scottish secretary, added: “Unite continues to engage with Petroineos, and we urge other stakeholders such as the Scottish and UK governments to do the same due to the implications that this proposal will have for the economies of the devolved and reserved administrations. Every option must be on the table in order to secure the hundreds of highly skilled jobs based at the Grangemouth complex for the long-term.”

Scottish Conservative shadow net zero, energy and transport secretary Douglas Lumsden said: “This is devastating news for the workers at Grangemouth and will be a hammer blow for the local and national economy if it goes ahead.

“The hostile attitude shown towards Scotland’s oil and gas industry from the SNP-Green Government – as well as Keir Starmer and Labour’s betrayal of the sector – will have been a factor behind this decision.

“They all fail to recognise the need for oil and gas – such as the refinery at Grangemouth – to be part of Scotland and the UK’s energy mix for years to come.

“Instead, the highly-skilled workforce at Grangemouth have been delivered the worst possible news at a difficult time.

“The SNP-Green Government must act now. We have requested an urgent statement from ministers today in the Scottish Parliament to outline what this will mean for workers and what decisive action will be taken to support them.”

Wellbeing economy secretary Neil Gray said: “This is a commercial decision and it is our understanding that these works will futureproof the site to allow it to continue as an important fuel supply source for years to come.

“The Scottish Government is committed to working with industry to secure a sustainable future for Grangemouth that reflects our ambitions for decarbonisation and a just transition for Scotland’s industrial sector whilst recognising the important role it plays in meeting fuel demand Scotland. We will continue to work in partnership with businesses like Petroineos to secure a long term, sustainable future for Grangemouth and those who live and work there.

“We will continue to engage with the UK Government and the business throughout this period.”

 

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