ScotGov sunk £300k on Sir Jim Ratcliffe oil refinery closure plan

Ministers have previously insisted they knew nothing of any potential closure of the oil refinery, part-owned by the petrochemicals giant controlled by billionaire tycoon Sir Jim Ratcliffe, until staff were told in November, last year.

Meanwhile, the biofuels refinery project at the centre of the public cash row is itself in doubt.

The Grangemouth plant is symbolic of Scotland's 'black gold' and would be used by the Scottish National Party during the 1970s in making their economic case for independence from the rest of the UK.

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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 at that point that a start had been made on projects that would lead to the end of oil refining.

Plans involve transitioning to produce a bio-refinery for green fuels while Grangemouth was also expected to become an imported fuels depot.

Refinery owner Petroineos - the joint venture between Ineos Group - the petrochemicals giant controlled by 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.

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.

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

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

In general major products 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.

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.

Economy secretary Mairi McAllan who has offered no hope of saving the Grangemouth refinery told the Scottish Parliament in February that taken to fruition, it could see Grangemouth become home to "Scotland's only sustainable aviation fuel production plant, capable of meeting future demand for decades to come".

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

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".

The Herald on Sunday can reveal that in August 2021, on behalf of the Scottish Government, the enterprise agency provided £123,500 in environmental aid towards a project that "indicated the potential for a bio-refinery" on the oil refinery site.

A year later, again on behalf of Scottish Government, the agency approved additional environmental aid support of £87,000 towards a further bio-refinery study. The month, that staff were told of the eventual demise of the oil refinery, a further £97,500 was quietly approved for a bio-refinery 'appraise' study. But the Herald understands this has yet to be paid out.

The details came as the agency was questioned about the transition arrangement for the Grangemouth oil refinery as it has been working through an options appraisal for the biorefinery.

Refinery operator, Petroineos Manufacturing Scotland Ltd, which posted record profits of more than £100m prompting renewed calls for action to save the refinery, confirmed the transition had been a long time in the planning and initially indicated it was felt to be well over a year.

But then Scots energy secretary, Mairi McAllan insisted it was “crystal clear” ministers were only told of the plans in November 2023 – the same time as workers and the UK Government. One specialist Grangemouth staff member told The Herald that details of the spend were "a betrayal of staff".

"It seems clear that there has been advance knowledge of this transition from an oil refinery for years before we were told in November. It is galling to hear that in the background for all this time, our taxes are effectively being used to help support the loss of jobs here."

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 Scottish Government had "undermined Scotland's refinery from within".

He said: "Openness and honesty is expected from governments not duplicity. Action not wishful thinking is what’s needed.

"The Scottish Government is at best naïve and at worst complicit. Money to prepare for sustainable fuel is wise but there needs to be a plant to refine it. At the moment if this goes then so does the site and so do the skills. It smacks of the Scottish Government seeking to be seen to do something but in reality achieving nothing other than enriching Ineos in their departure."

Refinery bosses have admitted, however, that there are problems with the biofuels plan.

It centres around 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.

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

A record of discussions 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".

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

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".

Mr MacAskill who 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 added: "No one denies the need to transition to sustainable fuels. But that’s not immediate. It’s fine to plan but you need to have a refinery and skilled workforce to operate it when it comes.

"If the petrol refinery closes in 2025, there’ll be neither site nor workforce in years to come when the transition finally arrives. Scotland will end up importing sustainable fuel as it’s to import oil taken from Scottish waters.

"It's why we have to extend, invest and transition. Keep the petrol refinery operating. Invest in it for the future and transition when that’s possible.

"It’s time UK and Scottish Governments protected Scottish jobs and promoted a Scottish industrial base. The UK Government need to stop selling Scotland out and the Scottish Government need to start standing up for the plant and workforce."

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 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 3% 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.

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.

Video: Grangemouth Oil Refinery : A driving tour inside

A Scottish Enterprise spokesman said: “We are working with Petroineos as well as local and national stakeholders. Our priority is exploring all options for the Grangemouth site, beyond traditional refinery operations, to maximise future employment.”

A Scottish Government spokesman said: “The Scottish Government is committed to working collaboratively with the business, trade unions, and UK Government to accelerate the phasing in of new low carbon projects that support opportunities for sustainable economic growth and associated employment at Grangemouth, including Petroineos’ bio-refinery project for which Scottish Enterprise provided grant funding support.

“The Scottish Government was made aware in November 2023 of Petroineos’ decision to commence preparatory work on new import infrastructure at Finnart and Grangemouth, on the same day as the workforce and the UK Government."

Petroineos declined to comment.