Scotland’s last remaining oil refinery is to close next year with the loss of 400 jobs.

First Minister John Swinney said Petroineos' decision to cease production in the second quarter of 2025 would create a “significant economic shock” for the country.

The closure of the facility at Grangemouth comes despite Project Willow, a study funded by the UK and Scottish governments looking at ways to secure a future for the site.

Ministers have promised a joint £100 million support package for the area. 

One surprising intervention on Thursday came when the SNP MSP for Falkirk East said she had found a potential buyer for the facility. 

Michelle Thomson told journalists she had signed a non-disclosure agreement and was restricted in what she could say, but that the firm wants to buy the refinery in its entirety. 

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Petroineos, the joint venture between INEOS and PetroChina, who own the 100-year-old plant say they have already recorded losses in excess of $775 million, despite investing $1.2 billion.

At First Minister's Questions, Mr Swinney said his government has an “absolute” commitment to work with the UK Government to “support the workers of Grangemouth in their time of need”.

He said he had made the case, along with the UK Government, to Petroineos for “refining to be continued for as long as it was possible”.

But in a statement, Frank Demay, chief executive officer at Petroineos Refining, said: “The energy transition is happening now and it is happening here.

"Demand for key fuels we produce at Grangemouth has already started to decline and, 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 further.

"That reality, aligned with the cost of maintaining a refinery built half a century ago, means we are exploring ways to adapt our business."

The company first announced plans to close the refinery last November, but its future as an import terminal would “require significantly fewer people to operate”.

The company will enter a formal redundancy process with unions.

They say they expect the transformation to "lead to a net reduction of approximately 400 roles over the next two years."

Mr Demay said: “Unfortunately, a terminal would require only around one-fifth of the current refinery workforce.

"Therefore we will soon enter an information and consultation process with representatives of our employees to discuss the proposals.

"We have already agreed to move from the UK statutory minimum redundancy terms to an 18-month package and if plans proceed we intend to do everything we can to reduce the impact on our people.

"We will of course be seeking to minimise compulsory redundancies as far as possible.” 

It is thought up to 280 workers could go in the three months following the closure while another 100 would be retained for up to a year to begin decommissioning work. 

SNP MSP Michelle Thomson said she was speaking with a potential buyer for Grangemouth. (Image: PA)

Speaking to journalists, Ms Thomson said: “I want to make sure that the buyer and their proposition is fully worked through and there’s private and appropriate discussions that need to take place.

“All I can say, with their permission at the moment, is that I believe there is a serious proposition to be made and approaches need to be made to the relevant parties.

 She added: “I believe this to be a serious offer and I personally will do everything in my power to try and get the best outcome.”

Shortly after the news of the closure, the UK and Scottish governments unveiled a "three-point plan for a just transition for the workforce and community".

The package includes £20m of new joint funding from the UK and Scottish governments on top of £80m promised for the Falkirk and Grangemouth Growth Deal, to invest "in local energy projects to create new opportunities for growth in the region".

The governments have also made immediate career support to help workers made redundant find new employment. 

Project Willow, a study funded by the UK and Scottish governments looking at ways to secure a future for the site, has also identified a shortlist of three credible options to "begin building a new long-term industry at the refinery site, including low carbon hydrogen, clean eFuels and sustainable aviation fuels". 

The UK Government has also said that the new National Wealth Fund could back projects that have the "potential to yield a viable long-term future for the site".

UK Energy Secretary Ed Miliband described the move as “deeply disappointing”

“Unlike in the past, the government is working in lockstep with the Scottish Government across every front. Workers and their families should be in no doubt this is a government that stands with workers, trade unions, and businesses to fight for jobs and investment in Scotland.” 

Scottish Government Cabinet Secretary for Net Zero and Energy Gillian Martin said:  “My immediate thoughts are with the workforce. This is a very challenging time for them and their families, and we will support every worker affected by this decision.  

“We are working very closely with the UK Government and together we have communicated our disappointment to Petroineos today.

“The Scottish Government has consistently made clear our preference was for refining to continue as long as possible, and we have continued to press the shareholders for a positive decision until the 11th hour. "

  Unite general secretary Sharon Graham said the “dedicated workforce” at Grangemouth had 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”.

She added: “This is now the last chance for this Labour government to show whether its really on the side of workers and communities. The road to net zero cannot be paid for with workers' jobs."

Alba Party Depute leader and Save Grangemouth Campaigner Kenny MacAskill said the closure would mean Scotland was "the only top 25 major oil producing country in the world that doesn’t have an oil refinery."

He added: "It will be economically disastrous to close Grangemouth and it will force thousands into unemployment in the Forth Valley. l

"Alba have been campaigning to Save Grangemouth and we have been working with the workers and unions.

"The new UK Labour Government have failed at their first test to defend Scottish industry and the Scottish Government have failed in their duty to stand up for the workers - like Alex Salmond’s Government I was a member of did when he on not one, but two occasions, when First Minister intervened to save the refinery."

Scottish Green MSP Gillian Mackay described the announcement as "a brutal blow for Scotland" and the local community.

She added: “All of us in the town know somebody who is employed directly or indirectly by the refinery. They’re the ones now suffering. A lot of people will be devastated, angry and extremely worried about what will happen next. I am too, I feel the same."