Petroineos Announces Closure of Grangemouth Refinery Amid Declining Fuel Demand

Petroineos, the joint venture between Sir Jim Ratcliffe’s Ineos and PetroChina, has announced the imminent closure of its Grangemouth refinery, a significant move driven by declining domestic demand for motor fuels and upcoming regulations banning new petrol and diesel cars.

Frank Demay, Chief Executive of Petroineos Refining, explained that the decision was influenced by a decrease in demand for the key fuels produced at Grangemouth. “With a ban on new petrol and diesel cars set to take effect within the next decade, we anticipate a reduction in the market for these fuels,” Demay said. The decision also reflects the financial strain of maintaining a facility that has been in operation since 1924. The refinery’s outdated infrastructure, coupled with an additional £40 million needed to sustain operations beyond next spring, played a crucial role in the closure decision.

The closure has elicited strong reactions from political leaders and unions. UK Energy Secretary Ed Miliband and Scottish Energy Minister Gillian Martin have expressed their profound disappointment, while union leaders have condemned the move as “industrial vandalism.” The Grangemouth refinery currently represents about 14% of the UK’s refining capacity, providing motor fuels and other products to Scotland and northern England. Despite the UK’s status as a net petrol exporter, it remains dependent on imports for diesel and jet fuel.

In response to the closure, Petroineos plans to develop an import and export fuel terminal at the site to maintain supply to customers. However, the refinery’s financial woes have been long-standing, with $775 million in losses since 2011 despite a $1.2 billion investment.

The closure will result in a significant job loss, with up to 280 positions cut within three months and an additional 100 employees remaining for up to a year to assist with decommissioning. About 75 workers will be retained to manage the new fuel terminal operations.

The UK and Scottish governments have initiated studies to explore potential future uses for the refinery, considering alternatives like hydrogen, biofuels, and sustainable aviation fuel. However, these alternatives are unlikely to be in place before the refinery’s shutdown. In response, a joint investment plan has been announced, increasing funding to £100 million for the Falkirk and Grangemouth Growth Deal to support new growth projects in the region. The UK government is also exploring the use of its National Wealth Fund to support future uses for the refinery site.

The closure is expected to have broader economic implications, impacting numerous small businesses dependent on the refinery. Hisashi Kuboyama from the Federation of Small Businesses in Scotland warned of significant knock-on effects on the supply chain, affecting many more jobs than those directly at the refinery.

Unite union’s General Secretary, Sharon Graham, criticized both Petroineos and politicians for their handling of the situation, stressing the need for job security and alternative employment opportunities for the affected workforce. “The road to net zero cannot be paid for with workers’ jobs,” Graham asserted, urging the Labour government to prioritize worker and community support during this transition.

While the closure will not affect other petrochemical operations at the Grangemouth complex, it represents a pivotal shift in the UK’s energy landscape, raising concerns about the nation’s increasing reliance on imported fuels and the future of the Grangemouth site and its surrounding community.