Petroineos to Close Grangemouth Refinery Amid Declining Fuel Demand

Petroineos, the joint venture between Sir Jim Ratcliffe’s Ineos and PetroChina, announced the closure of its Grangemouth refinery on Thursday. The decision comes in response to declining domestic demand for motor fuels and the impending ban on new petrol and diesel cars, which is expected to take effect within the next decade.

Frank Demay, Chief Executive at Petroineos Refining, highlighted that the demand for key fuels produced at Grangemouth has already started to wane. “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,” Demay said. He also cited the high costs of maintaining a refinery built nearly a century ago as a significant factor in the closure decision.

The announcement has sparked criticism from political leaders and unions. UK Energy Secretary Ed Miliband expressed deep disappointment, while Scottish Energy Minister Gillian Martin and union leaders condemned the move as “industrial vandalism.” The Grangemouth refinery accounts for about 14% of the UK’s refining capacity and supplies motor fuels and other products across Scotland and northern England. Despite the UK’s status as a net petrol exporter, it relies on imports for diesel and jet fuel.

To mitigate the impact, Petroineos plans to convert the site into an import and export fuel terminal to ensure continued supply to forecourts and other customers. The refinery, which has faced ongoing financial challenges with accumulated losses of $775 million since 2011, requires an additional £40 million to remain operational beyond next spring.

Approximately 75 workers will be retained to operate the new terminal, while up to 280 jobs will be lost within three months of the closure. Another 100 employees will remain for up to a year for decommissioning, with a few staying longer for further decommissioning and demolition.

The UK and Scottish governments are exploring alternative uses for the refinery site, including hydrogen, biofuels, and sustainable aviation fuel, though these options are unlikely to be implemented before the shutdown. In response, the governments have announced a joint investment plan, adding £20 million to the £80 million Falkirk and Grangemouth Growth Deal to support new projects in the area. The UK government is also considering using its National Wealth Fund to support alternative uses for the site.

The closure is expected to have significant economic repercussions, affecting numerous small businesses reliant on the refinery. Hisashi Kuboyama from the Federation of Small Businesses in Scotland warned of a broader impact on the supply chain, potentially jeopardizing many more jobs beyond the 400 directly at risk.

Sharon Graham, General Secretary of the Unite union, criticized both Petroineos and politicians for failing to secure alternative employment for the affected workforce. “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,” Graham said. She urged the Labour government to show its commitment to workers and communities, emphasizing that “the road to net zero cannot be paid for with workers’ jobs.”

While the closure affects the refinery operations, other petrochemical activities at the Grangemouth complex will continue. The shutdown represents a significant shift in the UK’s energy landscape, increasing reliance on imported fuels and raising concerns about the future of the site and the community dependent on it.