Ministers hopes of being 'world leaders' in green fuel in doubt

But Grangemouth bosses have raised serious doubt over a transition to a green fuel biorefinery saying the current position is "commercially suboptimal".

The Herald revealed in November that bosses at the Petroineos plant in Grangemouth established almost a century ago, told staff that Scotland "simply won't be big enough to support a fuels refinery" due to falling demand sparking fears for thousands of jobs within the plant as well as outside contractors.

Staff were told that a start had been made on projects that will see the Grangemouth plant transition from a refinery to potentially an imported fuels depot over the next five years.

READ MORE: Grangemouth: Jobs at risk as Sir Jim Ratcliffe-backed refinery to shut

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Refinery owner Petroineos - the joint venture between Ineos Group - the petrochemicals giant controlled by billionaire tycoon Sir Jim Ratcliffe - and China’s state-backed PetroChina - which bought the refinery in 2005, said it will remain a refinery until spring 2025 and that jobs would remain safe in the short term.

Ministers said that Petroineos had commenced early study work focused on the future establishment of a biofuels refinery at Grangemouth capable of producing sustainable aviation fuel.

And Ms McAllan told the Scottish Parliament last month that taken to fruition, it could see Grangemouth become home to "Scotland's only sustainable aviation fuel production plant, capable of meeting future aviation demands for decades to come".

She said a transition to hydrogen production and biofuels manufacturing potentially offer the opportunity to transition to "new sustainable jobs".

Energy minister Gillian Martin expressed hope that the potential of Grangemouth could be realised and that a biorefinery was an example where the transition from a refinery might be used for advantage.

A record of the January meeting of the Grangemouth Future Industry Board's Industrial Just Transition Leadership Forum said that Ms Martin expressed ambitions to become "world leaders in biofuels/sustainable aviation fuel".

But it also said that Petroineos while noting the ambitions said that there were "fiscal and policy obstacles".

It centres around on the UK cap on sustainable aviation fuel (SAF) produced from oils and fats feedstocks such as used cooking oil (UCO).

And Iain Hardie, head of legal affairs has said cap will need to be addressed as it puts the UK at a disadvantage in comparison to Europe.

READ MORE: Anger as ScotGov offers no hope of saving the Grangemouth refinery

The record stated that the Petroineos executive felt that it will "hinder progress of delivering bio fuels at pace".

It said he felt the current mandate for SAF is "unclear and that this disadvantages the business from progressing investment".

It said: "Further engagement with Government could help the business overcome these limitations with a view to encouraging inward investment into clusters such as Grangemouth."

But the record said he felt "the current position is commercially suboptimal with the current cap in place".

But energy security and net zero minister Graham Stuart said it is unlikely that the cap would be adjusted.

And Mr Hardie felt that the "commercial hurdles are clear and the potential impact of not addressing these issues will be continued loss of domestic manufacturing coupled with increased reliance on imports".

Former justice secretary now East Lothian MP and Alba Party deputy leader Kenny MacAskill who spearheaded the launch of a campaign to save the refinery said the development showed that the minsters' stance was "greenwashing at its worst".

The fair energy prices campaigner said it was "vacuous and fraudulent" to suggest that biofuels can be the saviour of refinery without explaining what's to be done from when it closes in 2025 until the "brave new world" arrives."

Mr MacAskill has been quizzing UK ministers over whether there had been any discussions with Petroineos on the potential merits of the Grangemouth refinery transitioning to biofuel.

Andrew Bowie, the parliamentary under secretary of state at the Department for Energy Security and Net Zero said there had been a meeting with executives at Petroineos on November 23, last year to discuss options for the future of the site, long term fuel security for Scotland, and consideration of jobs at the site.

He said: "Any potential decisions regarding future energy projects at the site are a private commercial matter."

Workers at the refinery slated the Scottish and UK governments over their failure to jointly develop proposals which could help protect hundreds of jobs at the complex.

Calls have been made to use a tiny fraction of the profits from the North Sea to save the Grangemouth refinery.

It has been estimated that £60-80m would be needed to re-start the hydrocracking unit at Grangemouth which some say will pave the way to profitability and a lifeline for the refinery and hundreds of jobs.

In general major products produced from hydrocracking are jet fuel and diesel but Liquefied Petroleum Gas (LPG) can also be produced.

Experts say the cost of repairing the Grangemouth unit which went offline in April, last year, and has not been working since has played a key part in its anticipated closure.

Mr MacAskill said: "There's currently neither plans nor any real interest in pursuing biofuels at Grangemouth by either the owners or the UK government.

"Biofuels may well have a role to play in future years and Grangemouth should be at the centre of that. But in the interim its's about sustaining the refinery so there's an industrial capacity to build on that matters.

"Its why Ms McAllan must move to get the funding to restart the hydrocracker increasing current profitability and demanding the Scottish oil be refined at Scotlands refinery not shipped abroad. Anything else is spin and greenwashing with neither substance nor basis in fact. Yet again the SNP coalition with the Greens is producing mythical policies yet ones which are hugely damaging to industrial Scotland."

A survey conducted by the Unite union involving hundreds of refinery workers, including contractors "strongly indicates" that the workforce believe there has been a "collective failure" to support them following the announcement by Petroineos to being the transition.

The survey found that 93% agreed that the potential impact of any potential closure on the local Grangemouth economy and that of surrounding communities would be ‘severe'.

Some 88% said that politicians were not doing enough to support and protect jobs at Grangemouth; And only 11% expressed ‘confidence’ in finding a “like for like” job in the event of refinery operations ceasing at the Grangemouth site; Only three percent expressed confidence in the ongoing “just transition” plans for oil and gas workers.

The refinery produces a range of fuels including petrol, diesel, kerosene, LPG and jet fuel and currently employs around 500 and it is understood there are hundreds of contractor workers that support staff. Ineos employs another 450 staff on the site at Forties Pipeline Services and a further 1,000 in its petrochemicals business.

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

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.

The company that operates the refinery made losses totalling nearly £360m in the pandemic-hit years of 2020 and 2021.

Much of that was down to what is called an "impairment charge" which relates to a drop in the value of its property, which counts as a loss on financial statements.

Some £383m dropped from its value, in the wake of resizing its operations from November 2020. It then announced the closure of one of its crude distillation units and its fluid catalytic cracking unit.

The cut in capacity of the refinery led to an estimated loss of up to 200 jobs in 2020, as the hit to fuel demand from the coronavirus pandemic hit profits across the industry.

In the two years before the pandemic, it made losses of £26.066m.

Ms McAllan said: “We continue to engage with Petroineos, Falkirk Council, the UK Government and trade unions to develop a collective understanding on how to realise the potential of the cluster and secure a future for the Grangemouth plant and its workforce.

“This includes a commitment to explore every avenue and accelerate all opportunities to secure a long-term, sustainable future for Grangemouth.

“We have seen elsewhere how the UK Government is able to provide significant financial support to aid industrial transition, most recently in Wales. I trust it will bring the same commitment to Scotland and to Grangemouth and call on it to consider all proposals brought forward.

“In the meantime, the Scottish Government’s expert working group on sustainable aviation fuel, which includes membership from Petroineos, continues to consider how its production and use in Scotland could be increased.”

A UK government spokesman said: “We know this is a concerning time for workers and their families, and are working closely with Grangemouth refinery on the long-term future of the site and how they are supporting staff.

“Sustainable aviation fuel will be a key part of helping us to reach net zero, however we cannot rely on limited resources like used cooking oil alone - these fuels need to be capped to allow space for new technologies.”