The Grangemouth oil refinery is undoubtedly one of Scotland’s most famous industrial sites.

On a school trip to the site some decades ago, when it was still run by BP, the thing which was most striking was its sheer scale, which overshadowed the astonishment at the price of the fish and chips in what was in those days a heavily subsidised canteen.

To this day, the size of the refinery remains remarkable, even from a great distance, such as when walking from Falkirk town centre towards the town’s football stadium.

The refinery also has a rich history, dating back to 1924.

Sadly, neither this scale and rich history, nor the skills and labours of the site’s workers, have been enough to protect the refinery from brutal market forces.

And today we had what the Federation of Small Businesses rightly described as the “devastating” news that the refinery is to close with about 400 of the 475 jobs being lost.

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Petroineos, a 50-50 joint venture between PetroChina and INEOS, announced back in November last year that it was planning to close the refinery.

This news was, rightly, greeted with utter dismay. Then, there was the emergence of hope that is sometimes usual in such situations: that closure could be averted.

However, this in reality always looked like a long shot.

Falkirk East MSP Michelle Thomson’s revelation today that there was a potential international buyer which might make a “serious” offer for Grangemouth oil refinery is something which should obviously be examined and pursued to the maximum extent possible. However, history of major industrial closures would suggest that we should keep hopes on this front in check for now, with the distance between expressions of interest and a deal being vast.

It was encouraging today to see the UK and Scottish governments highlight their commitment to help those affected by the devastating closure, and putting up a substantial amount of money to try to minimise the impact.

However, there is in such situations rarely anything that politicians can do when companies make decisions on cold financial grounds, as all big businesses do.

Diageo’s closure of the Johnnie Walker whisky bottling plant at Kilmarnock was a classic example of this. Back in 2009, then First Minister Alex Salmond even marched with thousands of other people to try to save the jobs at the Kilmarnock plant but all of the attempts to avert this closure were in vain.

Going further back, the closure of the state-owned Ravenscraig steel plant in Lanarkshire, which had such a grim effect on the areas around it, had a sad inevitability about it as it unfolded in demoralising chapters.

Working in the area shortly after this closure, there was no escaping the devastation to the local economy and to people’s lives that followed the demise of Ravenscraig.

The lack of any realistic prospect of Petroineos changing its mind, after announcing its plans to close the Grangemouth refinery last November, was evident in its statement on the reasons for the closure of the refinery today.

It highlighted the major losses sustained by the operation, crucially in the context of the energy transition. Looking at the bigger picture, this drive to net zero looks as if it will cause much more pain in years and decades to come, hitting some areas particularly hard, while money is poured into renewables.

 

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Petroineos also flagged the age of Grangemouth and its layout, factors that can obviously not be changed, and the degree of capital expenditure required to maintain the site.

It observed today that it had, last November, “outlined plans to transform the Grangemouth refinery site into a finished fuels import terminal and distribution hub in order to safeguard Scotland’s supply of fuels for the future”, adding that it was now confirming its “intention to cease refinery operations at Grangemouth during the second quarter of 2025”.

Frank Demay, chief executive officer at Petroineos Refining, spelled out the cold reality of what this means, putting it firmly in the context of the drive to net zero.

He 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.”

Mr Demay noted that “an import terminal requires significantly fewer people to operate than a refinery, so Petroineos will this month enter a formal consultation process with the site’s 475 employees and their representatives on the details of the transformation plan, which is expected to lead to a net reduction of approximately 400 roles over the next two years”.

Petroineos highlighted the global market forces at play in the refining sector.

It said: “Grangemouth is the UK’s oldest refinery and currently faces significant challenges due to global market pressures and the energy transition. Refining is a globally competitive industry and Grangemouth is increasingly unable to compete with bigger, more modern and efficient sites in the Middle East, Asia and Africa.

“Due to its size and configuration, Grangemouth incurs high levels of capital expenditure each year just to maintain its licence to operate. This annual outlay on essential planned maintenance and running repairs has been consistently higher than the company’s earnings over the past decade.”

And it quantified the losses made at Grangemouth. These are striking in total, though a fair bit less so in terms of the average annual losses during the period since 2011 for which Petroineos provided numbers.

Petroineos said: “Petroineos is a joint venture between INEOS and PetroChina and those shareholders have invested more than $1.2bn since 2011 to maintain the refinery’s safe operation, recording losses in excess of $775m during the same period.”

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There are three different businesses employing around 2,000 people in total at the Grangemouth site, which extends to 1,700 acres and is Scotland’s biggest industrial complex. The wider Grangemouth complex also hosts between 2,000 and 5,000 contractors each day, working on various projects.

As well as its 50% stake in the refinery, INEOS has two wholly owned businesses at Grangemouth. INEOS said these would be “largely unaffected” by the planned refinery closure.

There is the INEOS petrochemicals plant at Grangemouth, which employs around 1,000 people with 1.4-millon-tonne production capacity for products including ethylene, ethanol, polyethylene, and polypropylene.

And there is the Forties Pipeline System, another INEOS business which employs around 500 people, transporting 300,000 barrels of crude oil per day from 85 North Sea fields. The pipeline also facilitates around 30% of the UK natural gas supply, INEOS noted.

INEOS said today of these two operations: “The INEOS businesses at Grangemouth, namely INEOS O&P UK and INEOS FPS (Forties Pipeline System), will continue as normal delivering high-quality services and products to our customers and are largely unaffected by this change. We wish to assure our customers, suppliers and other stakeholders that it is business as usual for the INEOS businesses at Grangemouth.”

It is good to hear this “business as usual” message for these two sizeable operations.

However, while the closure of the refinery might have been inevitable given the energy transition, global market forces, and the cold financial decisions of major companies, that does not make it any less “devastating”.