Scotland's only oil refinery Grangemouth to close despite rescue talks as around 400 jobs facing axe

Petroineos will close Scotland’s only oil refinery despite rescue talks from Scotland’s two governments, The Scotsman understands.

The decision had been touted for months, but despite calls for the UK and Scottish governments to rescue the Grangemouth facility, Petroineos is poised to press ahead with shutting the site - with 400 jobs to go over the next two years.

Scotland’s two government’s have now committed £100 million, including the £80m Falkirk and Grangemouth Growth Deal to support the community and workers and create low-carbon opportunities.

The £1.5m joint-funded Project Willow study has 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.

Last November, Petroineos outlined plans to transform the Grangemouth refinery site into a finished fuels import terminal and distribution hub. Petroineos has today confirmed its intention to cease refinery operations at Grangemouth during the second quarter of 2025.

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 loss of around 400 roles over the next two years.

UK Energy Secretary, Ed Miliband said the news was “deeply disappointing”.

He added: “We will stand with the workforce in these difficult times, that is why we are announcing a package of investment to help the workforce find good, alternative jobs, invest in the community and serve a viable industrial future for the Grangemouth site, with potential for future support from the national wealth fund.

“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.”

SNP Net Zero and Energy Secretary, 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.

“This significant package of support combines immediate help for affected workers and a long-term contribution to ensure that Grangemouth continues to thrive in the future. We are clear that there should be a just transition for the refinery site and we remain committed to bringing forward low carbon opportunities that will sustain skilled jobs across the wider area for many years to come.”

Writing on X, formerly known as Twitter, First Minister John Swinney said: “I am deeply disappointed that Petroineos have confirmed their decision to close the Grangemouth refinery in 2025. My immediate thoughts are with the workforce.

“We will continue to engage closely with the UK government to deliver an investment plan, which includes a £100m package and immediate career support for workers, to help secure an industrial future for the site.”

Grangemouth is the UK’s oldest refinery and currently faces significant challenges due to global market pressures and the energy transition.

The company said that due to its size and configuration, Grangemouth incurs high levels of capital costs each year just to maintain its licence to operate. This annual cost on essential planned maintenance and running repairs has been consistently higher than the company’s earnings over the past decade.

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 action we are taking to create an import terminal will safeguard fuel supply for Scotland. We currently expect Grangemouth to be ready to operate as a national distribution hub for finished fuels in Q2 next year.

“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.”

While preparing the refinery site for the transition to an import terminal, Petroineos is working with UK and Scottish governments to analyse options for Grangemouth to become a low-carbon fuels manufacturing hub.

By Spring 2025, Project Willow aims to have identified commercially viable opportunities to develop low-carbon fuels that would underpin government commitments to net zero transition, maximise local employment, and contribute to long-term sustainable energy and fuel security in Scotland and the UK.

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