A just transition for Grangemouth?

In a September statement, site owner Petroineos confirmed plans, first shared in October 2023, to cease production in the second quarter of 2025, with the loss of all but 75 of the 475 jobs at the site.

The decision has come on the back of the plant haemorrhaging cash, to the tune of millions of pounds over the last decade, and its inability to compete with newer refineries in Africa, Asia and the Middle East. In the week

leading up to the announcement Grangemouth has been accruing average daily losses of 500,000 US dollars (£380,000).

Responding to the announcement, Scotland First Minister John Swinney said it would create a “significant economic shock” as the Scottish and UK governments promised a joint £100m support package for Grangemouth.

However, Scottish energy secretary Gillian Martin was unable to say how many jobs the investment would likely save but claims to be “confident” saying: “They are a highly skilled, highly experienced workforce who have the skills that could be transitioned into making biofuels, into making hydrogen and, of course, running the import terminal.

“I am confident that those highly skilled people will find other work.”

There is an increasingly urgent need to deliver a full transition from fossil fuel production to sustainable alternatives, but this cannot be at the expense of the workforce.

Neither can there be a cessation in UK production of fossil fuels, only to replace the lost production with imports. It is neither just, nor an effective transition, to import carbon and export jobs.

A just transition away from fossil fuels means moving to a more sustainable economy in a way that’s fair to everyone – including those working in transitioning industries. But if the transition is driven by profitability, then it will be, inevitability, the workforce that pays the ultimate price. This would be an unjust transition.

Status quo

Following September’s announcement, SNP MSP Michelle Thomson, MSP for Falkirk East, claimed she has been in discussion with a ‘serious prospective buyer’ who would keep the site as an oil refinery.

“Wary” of talk of a potential buyer, Gillian Martin commented: “I think one of the things that I’m slightly wary of is the fact that Petroineos actually said around late November last year that their intention was to close the refinery in its current form and turn it into an import terminal.”

“I would have imagined that if anyone was interested in taking over the refinery, that would have been the key point to get in touch.”

Michelle Thomas would not name the prospective buyer, having signed a non- disclosure agreement (NDA), but believes the North-American buyer “to be serious, with an appetite and a willingness to buy the

Grangemouth refinery in its entirety including its jobs.”

Confirming that the purchase would be funded by the buyers own resources, rather than requiring government support, the MSP said

she hoped the international buyer could meet with John Swinney and Petroineos to discuss a potential deal.

No promises

Thomson suggested that talks had been ongoing for a while, and added: “We shall see, but being quite clear, there’s some way to travel.

“These things are very complex. There’s lots of moving parts in terms of business plan and funding and so on. I am not making any promises. I am merely saying that there are options and I am duty-bound to pursue all options and that is what I’ll do.”

Following her initial comments, Thomson raised the offer with John Swinney during First Minister’s Questions with Swinney saying he would be “very happy” to open discussions with a potential buyer.

Energy transition impacts

Due to its size and configuration, Grangemouth incurs high levels of capital expenditure each year just to maintain its licence to operate. This annual outlay on essential planned maintenance and running repairs has been consistently higher than the company’s earnings over the past decade.

Petroineos is a joint venture between INEOS and PetroChina who have invested more than $1.2bn since 2011 to maintain the refinery’s safe operation, recording losses in excess of $775m during the same period.

Frank Demay, Chief Executive Officer at Petroineos Refining, said: “The energy transition is happening now and it is happening here. Demand for key fuels we produce at Grangemouth has already started to decline and, 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 further.

That reality, aligned with the cost of maintaining a refinery built half a century ago, means we are exploring ways to adapt our business.

“The action we are taking to create an import terminal will safeguard fuel supply for Scotland. We currently expect Grangemouth to be ready to operate as a national distribution hub for finished fuels in Q2 next year.

“Unfortunately, a terminal would require only around one-fifth of the current refinery workforce. Therefore we will soon enter an information and consultation process with representatives of our employees to discuss the proposals.

We have already agreed to move from the UK statutory minimum redundancy terms to an 18-month package and if plans proceed we intend to do everything we can to reduce the impact on our people. We will of course be seeking to minimise compulsory redundancies as far as possible.”

Wakeup call

Responding to the announcement, UK energy secretary Ed Miliband said the move is “deeply disappointing” with the Unite union branding it an “act of industrial vandalism, pure and simple”.

Elizabeth de Jong, Chief Executive Officer of Fuels Industry UK said: “We are very sad to hear that Grangemouth refinery is planning to become a fuels’ import terminal.

“As we have told Government, the fuels sector is vital for the nation’s energy security and net zero ambitions, but faces difficult investment conditions in the UK, as this decision shows. Today’s announcement must be a wake- up call for Government to work more closely with us and our member companies to address the long-term challenges facing the sector.”

Grangemouth complex

There are three different businesses at the Grangemouth site, which spans 1,700 acres and is Scotland’s largest industrial complex, employing around 2,000 people in total:

• The oil refinery: operated by Petroineos, a 50/50 joint venture between PetroChina and INEOS, employing c.475 people.
• The petrochemicals plant: an INEOS business employing c.1,000 people.
• The Forties Pipeline System: another INEOS business which employs c.500 people, transporting 300,000 barrels of crude oil per day from 85 North Sea fields. The pipeline also facilitates approx. 30% of the UK natural gas supply.

The wider Grangemouth complex also hosts some 2,000-5,000 contractors each day.

Business as usual for INEOS

Following the announcement, INEOS moved quickly to issue reassurances regarding the two other businesses located on the wider Grangemouth complex:

“INEOS O&P UK and INEOS FPS (Forties Pipeline System), will continue as normal and are largely unaffected by this change. We wish to assure our customers, suppliers and other stakeholders that it is “business as usual” for the INEOS businesses at Grangemouth.

“INEOS Grangemouth remains committed to a long term successful future for the site which includes the commitment to deliver net zero by 2045.”

Fears for Grangemouth future

June Wyper, a Grangemouth resident with family and friends who have worked, and still work, at INEOS, in Grangemouth, spoke with Fuel Oil News to share her intense disappointment with the decision and her fears for the area.

“With the loss of 400 jobs, I do not take any comfort that two of the INEOS businesses are unaffected. This will have a detrimental effect on families involved, local businesses and the town of Grangemouth.”

Echoing concerns over the need to address investment in the industry, June continued: “I believe the responsibility lies with Jim Ratcliffe and the Scottish Government who could have invested in Grangemouth Refinery over a period of 5 years, therefore saving jobs and the future of Scotland’s refinery. I believe the UK Government could have intervened.

“As a wife, mother and grandmother I am nervous for the future of Grangemouth; INEOS is a major employer in the area. Grangemouth used to be a thriving town but, like other towns, has seen such a detrimental effect on shops, living standards, jobs and local services brought on by austerity and the cost-of-living crisis.

Community services have taken a big hit, with more cuts to come, and I fear for the future of our young people as there is nothing to keep them in Grangemouth.

“The town will suffer with the closure of the Grangemouth Refinery. This will hurt the local economy badly; flat rentals, local hotels, local shops etc. which the workforce of INEOS all contribute to.”

THE ROAD TO NET ZERO CANNOT BE PAID FOR WITH WORKERS’ JOBS

Fight for jobs

Also highlighting the potential wider impact of the closure, UK union, Unite, which represents 500 workers at the site, has vowed to explore all avenues to preserve high quality jobs at Grangemouth.

The union says the plans place the jobs of those employed directly at Grangemouth in jeopardy, but could also impact thousands more in the supply chain.

Highlighting “widespread fury within the workplace due to the failure of the bosses and politicians to ensure the future of the site”, Unite general secretary Sharon Graham said: “This is an act of industrial vandalism, pure and simple.

“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.

“This is now the last chance for this Labour government to show whether it’s really on the side of workers and communities. The road to net zero cannot be paid for with workers’ jobs. This is the only refinery left in Scotland, and it must remain. There are alternative plans.

“This is yet another example of workers paying for a crisis they did not create while billionaire owners laugh all the way to the bank.“

Pivot to low carbon

Unite is now in high level talks with the government about alternatives for the site, including the production of sustainable aviation fuel (SAF).

Derek Thomson, Unite Scottish Secretary said: “The sole objective for Unite remains that the jobs at the refinery, and thousands more in the supply chain, are protected by any means. The governments involved cannot simply hide behind the convenient smokescreen that this is a commercial decision which they couldn’t influence.”

While preparing the refinery site for the transition to an import terminal, Petroineos is simultaneously working with UK and Scottish governments to analyse options for Grangemouth to become a low-carbon fuels manufacturing hub.

Next year’s closure has accelerated efforts to plot a pathway for a green future for Grangemouth.

An initial feasibility study, ‘Project Willow’, funded equally by the Scottish Government and UK Government, is assessing various low- carbon opportunities from technical, economic, commercial, regulatory, environment, community and skills perspectives.

The initial research phase is complete, with shortlisted options for development including, but not limited to, Sustainable Aviation Fuel (SAF), low-carbon hydrogen and related products, and eFuels. The project team has entered the second phase of research, comprising a detailed assessment of the viability of each shortlisted option.

By Spring 2025, the project aims to have identified commercially viable opportunities to develop low-carbon fuels that would underpin government commitments to net zero transition, maximise local employment, and contribute to long-term sustainable energy and fuel security in Scotland and the UK.

Delivering these opportunities may yet deliver a just transition – but is it all coming too late for the people of Grangemouth?

^{Image credit: INEOS}

This article originally appeared in the October 2024 issue of Fuel Oil News magazine. View the magazine