UKGov admits just 10% of our oil is refined in Scotland

The revelation has emerged after UK ministers were urged to act as new research revealed Scotland was set to become a 'third world' fuel-producing nation - despite a continuing reliance on North Sea oil and gas production.

It has led to concern that Scotland has lost billions from not refining its own oil - while polluting the planet by exporting it.

Analysis shows that Scotland faces becoming the only one of the top 25 major oil-producing nations that does not have a refinery to produce car fuel when the Grangemouth plant goes.

READ MORE: Scotland faces becoming 'third-world' fuel-producing nation

Hundreds of jobs are at risk over plans to close down the nation's only oil refinery at Grangemouth, part-owned by the Ineos Group, the petrochemicals giant controlled by billionaire tycoon Sir Jim Ratcliffe.

The transition from a Petronineos refinery to potentially an imported fuels depot is expected to take up to five years and came as Sir Jim Ratcliffe moved to take a 25% stake in Manchester United in an estimated £1.25bn deal.

Refineries are crucial for turning unprocessed crude oil into products we can use like diesel and petrol for cars.

The Grangemouth plant has a refining capacity of 150,000 barrels per day while it 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.

Its importance is further cemented as it is connected to the major Forties Pipeline System (FPS) - which carries about 40% of the UK's oil.

The original 32-inch pipeline was opened by the Queen in 1975 to transport oil from the Forties Oil Field, the UK’s first major offshore oil field.  In 2017, the 235-mile pipeline system linked 85 oil and gas assets to the UK mainland and Grangemouth.

It was symbolic of Scotland's 'black gold' which would be used by the Scottish National Party during the 1970s in making their economic case for independence from the rest of the UK. It was argued that North Sea oil would not benefit then nation to any significant degree while the nation remained part of the United Kingdom.

It can be revealed that in response to concerns laid down in the House of Commons by former justice secretary now East Lothian MP and Alba Party deputy leader Kenny MacAskill, the UK Government has admitted that since the start of 2022, Grangemouth has received "on average less than 10% of its supply from the North sea via the Forties pipeline".

It is said that meant that the conversion of the refinery into an import terminal would not be expected to impact significantly on North Sea production.

Graham Stuart, UK minister of state for energy security and net zero said in response to Mr MacAskill's concerns that in the wake of the Grangemouth refinery closure, North Sea crude would be made available to the open market.

He said: "Petroineos’s plans will ensure that the Grangemouth site can maintain Scotland’s fuel supply through imports. Adapting the infrastructure to accommodate imports in larger tankers, particularly of diesel at Finnart on the west coast of Scotland, will ensure that the import terminal has greater flexibility and maintain robust fuel security.

"I recognise that consumers may be worried that increasing the UK’s reliance on imported fuel products could increase the price they pay at the pump. I want to provide reassurance that this conversion is unlikely to drive up the price of petrol and diesel for the Scottish consumer. Fuel prices are mainly driven by international petroleum product markets and exchange rates, and imports into other sites...are already competitive in the Scottish market."

The position has been condemned by Mr MacAskill, a fair energy prices campaigner who says that the nation has not just lost billions from not refining its own oil - but is causing environmental damage from shipping of the raw crude.

He said the shipping of crude to and from Scotland was "absurd" and "must end" with Grangemouth at the centre of refinery operations, rather than being eventually shut down.

"It is absurd to import oil when we have our own resource," he said. "Not only is it economic self-harm, but it is environmentally daft to transport it across the seas when it is off our shores. Why spew out the significant fumes of a supertanker by the hundreds of thousands when we can pipe the oil ashore."

He said if the refinery closure proceeds Scotland would be treated like a "developing nation" with its raw product " taken for a song and then sold back as a refined product, but at a premium to people and nation".  He added: " Exploitation is what it is called. "

UK ministers have consistently stated that developing the Rosebank field, which is twice the size of the controversial Cambo oil field, will improve UK energy security and help UK consumers, overriding concerns from climate experts and their own advisers.

The Rosebank project was approved by regulators in September after a series of delays, as regulators sought more information on the environmental impacts of the project.

The UK oil and gas regulator’s decision in September to grant the Oslo-listed Equinor and the British firm Ithaca Energy permission to develop the Rosebank oil and gas field was condemned by the Green party MP Caroline Lucas as “the greatest act of environmental vandalism in my lifetime”.

Green campaigners, including Greta Thunberg, had called on the UK government to halt the development, arguing that it contravened Britain’s plan for a net zero economy.

In December, two campaign groups, Greenpeace and Uplift, announced separate legal challenges to the proposal, which will be heard early this year.

The Government claimed the decision would support and oil and gas industry which adds £17bn annually to the economy and supports around 200,000 jobs.

But in a response to an MP's question, it has emerged that Amanda Solloway, government whip and parliamentary under secretary of state for the Department for Energy Security and Net Zero said it would not be “desirable” for oil and gas produced in the North Sea to be set aside for UK use.

“The UK is a net importer of both gas and oil. Gas produced in the UK is the equivalent to about half of our demand,” she stated. “However, due to UK refinery specifications and global market conditions, around 80% of the oil produced in the UK is refined overseas into the products demanded by the UK market. It is not desirable to force private companies to 'allocate' oil and gas produced in the North Sea for domestic use.”

According to Equinor’s estimates, the Rosebank project represents a direct investment of approximately £8.1 billion, of which £6.3 billion is likely to be invested in UK-based businesses, with the developer also estimating that at its peak the field producing 69,000 barrels of oil and 44 million cubic feet of gas per day.

Mr MacAskill said: "Forties should be refined at Grangemouth not tankered across the seas. Similarly for Rosebank when it comes on stream. The environmental damage of shipping out and in is appalling and undermines the argument to use our own product."

It is estimated that the Grangemouth refinery produces around a sixth of all the petroleum products delivered across the UK.

The 1,700-acre site supplies 70% of the fuel to Scotland's filling stations as well Northern Ireland and the north of England.

New analysis, based on data produced by the World Population Review and Oil and Gas Journal shows that Scotland produces an estimated 748,840 barrels of oil out of the 772,000 in the UK, which is ranked 21st in a list of the biggest oil-producing countries in the world.

Once Grangemouth goes, Scotland would be the only one of the top 25 major oil producing nations that would not have a refinery.

There would be five others remaining in the UK, after the Grangemouth closure.

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. They say the preparatory work will make it possible to import petrol, diesel, aviation fuel and kerosene into Scotland from vessels arriving via the Firth of Forth.

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

The Herald revealed that the refinery has incurred huge losses of over £360m over two years and sources have said that means that any government attempt to save the nation's only oil refinery would not be viable.

Mr Stuart added: "I recognise that news of a plan to transition Grangemouth refinery into an import terminal is undoubtedly a matter of concern for many people. However, I make clear that the Government are committed to ensuring continued fuel supply, protecting jobs and creating opportunities in Scotland and across the UK.

"I want to recognise that Grangemouth refinery has been an important asset for the fuel supply of Scotland and the local economy since it opened in 1924. No final decision on the future of the refinery has been made, but the planning for the conversion of the refinery into an import terminal is a commercial decision by its owner, Petroineos.

"That reflects its view of the economic sustainability of the refinery in the context of expected refining margins, domestic demand projections and international competition. Even in this macroeconomic context, the UK and Scottish Governments are working together to understand all the options for the future of the refinery."

He added: "The Government remain absolutely committed to supporting the North Sea oil and gas sector."