Doomed Grangemouth refinery set for stay of execution as unit restarts

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.

The Grangemouth plant was established almost a century ago and became symbolic of Scotland's 'black gold', used by the Scottish National Party during the 1970s in making their economic case for independence from the rest of the UK.

The vital Grangemouth hydrocracker unit, which produces jet fuel, diesel and Liquefied Petroleum Gas (LPG) went offline in April, last year and has not operated since. It is seen as a key reason why the the refinery was heading towards imminent closure.

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But the Herald can reveal that the profitable unit has been started up again with insiders saying it was expected to have cost around £30m to fix.

The development has led to calls to lift the immediate threat of closure.

Insiders have told the Herald that the business is taking a "watch-and-see" approach and that mid-2025 is now seen as the earliest that the plant will halt production as an oil refinery. It is expected this will mean that an end point will be nearer to 2027 when new investment is needed on the hydrocracker.

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'.

And Derek Thomson, Unite's Scottish secretary, said it welcomed news that the hydrocracker was up and running again after technical issues.

He added: "We believe this further strengthens our arguments that the oil refinery’s lifespan must be extended, and that more investment is allocated to sustaining the refinery’s operations for the long-term.”

Petroineos Manufacturing Scotland Limited, which owns and operates the refinery made a record pre-tax profit for 2022 of £107,476,000, following a £50.568m loss the previous year with company bosses admitted that the pandemic years of 2020 and 2021 had had a "pervasive effect" on the business.

Its previous profit high in recent years was the £25.20m gained in 2017.

Mr Thomson added: “The financial dynamics at the Grangemouth complex have now significantly changed with this development and with the hydrocracker operating it will help the refinery to return healthy profits for Petroineos. The only sensible commercial decision to be made is to maintain the refinery’s operations and in doing so retain 500 highly-skilled jobs. Unite’s message is simple: Keep Grangemouth Working.”

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 had been made to use a tiny fraction of the profits from the North Sea to keep the Grangemouth refinery operating by restarting the hydrocracker.

Former justice secretary now East Lothian MP and Alba Party deputy leader Kenny MacAskill, who has been leading a fight to save the refinery said: "What Grangemouth needs is time. The hydrocracker restart is a vital part of that. Profitability is significantly increased. Hopefully, all works out but if not further investment in that aspect will be needed.

"If it works all well and good. If not then investment is needed, The profits flowing from the North Sea justify that and investments south of the border to BMW show money is available for infrastructure support.

"But this should be a juncture to lift the threat of closure. No one denies that ultimately there needs to be a transition but that takes time.

"The workforce and the community need certainty. Management and governments in London and Edinburgh must all commit to keeping the plant open."

One specialist staff member told the Herald that the restarting of the hydrocracker was expected last April but had been delayed with costs expected to be around £30m which involves inspection, maintenance and repairs with what is believed to be scope for an upgrade.

He said the end date for the refinery depends on how profitable it is going forward.

He said that depended on the "geopolitical situation and a number of other factors eg uptake of electric vehicles, other refineries outside north west Europe such as the massive Dangote Refinery in Nigeria which came online in the last six months or so, which if/when they start supplying jet fuel and diesel into Europe will flood the market and make it hard for us older less efficient refineries to remain financially viable."

He believed the timescale for closure will now be sometime between the second quarter of 2025 and the start of 2027.

The refinery produces a range of fuels including petrol, diesel, kerosene, LPG and jet fuel and currently employs around 500 directly 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.

The campaign to save the refinery has been supported by legendary Scots band The Proclaimers who have stated in a video message (above) that it cannot be “Grangemouth No More”.

Ministers have previously been accused of betrayal of the workforce as it emerged it has pumped nearly £300,000 of public money over nearly three years on a project which would lead to the oil refinery's demise.

The first tranche of money over plans for sustainable fuel production was approved by Scottish Enterprise on behalf of the Scottish Government in August 2021, over two years before confirmation of the eventual closure of Grangemouth's historic refinery.

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

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

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

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 at the refinery has said the 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".

Petroineos was approached for comment.