UK Government's failure to back Grangemouth shows contempt for Scotland
The UK Government said last week that it will put £200 million towards investing in an alternative future for Grangemouth Believe in Scotland has serious doubts that the full £200 million will actually materialise or be used as anything other than boosts for large companies given the (co-investment with the private sector nature of the funding). But the plant - which made £107 million profit last year - is still closing and Scotland will be left without oil refining capacity is a major oil producing nation which is madness.
- More than 400 skilled workers have already lost their jobs - redundancy notices went out earlier this month
- Several thousand jobs in the wider supply chain are at risk and the time scale of this investment won’t save those.
- The UK Government is still finding three times that sum to help owner Ineos move to a new site inside the EU.
- Scotland is still losing its only oil refinery - while England and Wales have five. That means oil from Scotland’s waters can’t be refined here.
- This will still impact Scotland’s economy and help Unionists to make the case that Scotland is too poor to be independent
- There is a lack of clarity about when this money will be paid and what it will achieve
Here are five key points about the Grangemouth situation:
1 The UK has £600 million to invest in Antwerp
An investment of £200 million is a start but the UK Government is continuing to go ahead with a £600 million loan guarantee for an Ineos project in Belgium when the conglomerate is set to close the Grangemouth oil refinery.
Brian Leishman, the MP for Alloa and Grangemouth, told Treasury questions in the Commons: “The previous Conservative government decided to back an Ineos project in Antwerp with a £600 million loan guarantee.
“I have spoken with the current Secretary of State and Government minister about this and have been told that the Government has no plans to stop this money even though Ineos plans to close the Grangemouth refinery and thousands of jobs will be lost.
“Why is there £600 million for Antwerp and not Grangemouth? And why would the Government allow this to happen and not use the £600 million as leverage with Ineos in order to avoid Scottish job losses?”
2 Grangemouth closure will impact Scotland’s economic position
The closure will have an impact on Scotland’s exports, its revenues and GDP - used by those attempting to calculate the strength of Scotland’s economy and how it would fare as an independent country. Closing Grangemouth will help the false Unionist position by helping them claim that Scotland is a less wealthy country that can’t afford to be independent and dependent on English handouts.
There will also be a negative impact on Scotland’s energy security, making sure that Scotland will not be able to refine North Sea oil at home but will have to see it exported and bought back as end products thus reducing GDP due to higher imports.
Gordon MacIntyre-Kemp the economist and Chief Executive of Business Group Business for Scotland said:
“Belgium produces almost zero oil but has 4 petrochemical refineries. Scotland is losing its only oil refinery because the UK Gov is paying Ineos £600 million to close Grangemouth and build Belgium a 5th petrochemical refinery. This is utter madness - irrefutable proof that the UK Gov is deliberately sabotaging Scotland’s economy, our energy security and our future.”
3 Grangemouth is profitable and shouldn’t need to close
Grangemouth is Scotland's only crude oil refinery. It currently produces aviation fuel and a wide range of chemical products derived from oil for agriculture and industry. It uses oil from the North Sea but it also imports shale oil from the US and natural gas from Europe.
Grangemouth has made losses in the past but in the year to 2024, it posted a record profit of £107 million. Company bosses admitted that the pandemic years of 2020 and 2021 had a "pervasive effect" on the business. This last year it went back to the black and will be profitable again in the current year
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. 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.
Ineos acquired the site in 2005 and is responsible for the entire plant, while the refinery itself is owned by Petroineos - a joint venture between Ineos and PetroChina. The owners' current plan is to convert the site into a terminal able to import petrol, diesel, aviation fuel and kerosene from the Forth into Scotland.
But this import hub needs far fewer workers with just 65 of 500 jobs expected to be retained.
Others are at risk. Approximately 2,000 people are directly employed at the site - 500 at the refinery, 450 on the Forties pipeline from the North Sea and a further 1,000 in the Ineos petrochemicals business.
4 - England and Wales have five profitable refineries
Grangemouth’s closure will leave Scotland without an oil refinery - while England has four and Wales one.
The Pembroke oil refinery in Wales is one of the biggest in Europe and is highly profitable. Owner Valero Energy returned over $6.6 billion to stockholders through dividends and stock buybacks in 2023.
ExxonMobil has invested heavily in its refinery at Fawley in Hampshire, the biggest fuel producer in the UK, and it is part of a highly profitable operation. The other oil refineries - at Stanlow, Lindsey and Humber- have faced challenges but they are not loss-making. They are benefiting from large investments from their owners to reduce their carbon footprint and keep them competitive. (But several other refineries, both in the UK and Europe, have closed down or become import hubs in the last two decades.)
5 Too late for a just transition
An alternative future for the plant as a hub for sustainable aviation fuel may be possible. The biofuels market doesn't yet exist at scale. But it soon will - the demand is there and will increase as new rules over aviation pollution come into force. Scotland could move into a strong position to supply this emerging market.
Rise, a coalition group made up of the UK’s leading airlines, airports, engineers and producers, including Edinburgh, Glasgow and Aberdeen Airport, said Scotland could become a world-leader in SAF production which could boost the economy by £1.8bn by 2030 and create 60,000 jobs across the UK.
The £200m investment that PM Keir Starmer announced at the Labour Scottish conference is unlikely to be enough to change Grangemouth into a production hub for Sustainable Aviation Fuels (SAF) or a production site for green hydrogen.
There is also a lack of clarity about just what it is the UK government wants to invest in. The plan seems to be to use the money to attract businesses to set up in the area of the site but no word about what they will do there.
However, for a just transition to be a reality, a joined up investment strategy would have to have been in place before the skilled workers were made redundant.
Conclusion
There is no reason why Scotland cannot have a profitable oil refinery - but the managerial capability and the investment that would have been required was not there.
The unnecessary closure of Grangemouth will impact Scotland’s economy and its energy security.
Labour’s investment is too late for a just transition - hundreds of skilled workers have been made redundant and more jobs are on the line.
Scots will compare Starmers £200 million investment proposal to the £600 million loan guarantee for a new refinery for Belgium and question the UK’s commitment to Scotland.
The limits of devolution are revealed once again. Holyrood has no power to affect this momentous change to the Scottish economy.
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