Petroineos Confirms Intention to Cease Refinery Operations at Grangemouth

In a release sent to Rigzone recently, Petroineos “confirmed its intention to cease refinery operations at Grangemouth during the second quarter of 2025”.

The company highlighted in the release that, last November, it “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”.

Petroineos stated in the release that an import terminal requires significantly fewer people to operate than a refinery. It added that 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 the company said is expected to lead to a net reduction of approximately 400 roles over the next two years.

Grangemouth Refinery is one of the six remaining refineries in the UK and the only refinery in Scotland, Petroineos’ website notes, highlighting that the site has a refining capacity of 150,000 barrels per day.

“Grangemouth is the UK’s oldest refinery and currently faces significant challenges due to global market pressures and the energy transition,” Petroineos said in its release.

“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,” it added.

“Due to its size and configuration, Grangemouth incurs high levels of capital expenditure each year just to maintain its license 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,” it continued.

Frank Demay, Chief Executive Officer at Petroineos Refining, said in the release, “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,” he added.

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

Demay said, “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,” he added.

Demay noted in the release that 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,” he said.

“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,” he added.

“We will of course be seeking to minimize compulsory redundancies as far as possible,” he went on to state.

Petroineos stated in the release that, while preparing the refinery site for the transition to an import terminal, it is simultaneously working with UK and Scottish governments to analyze options for Grangemouth to become a low-carbon fuels manufacturing hub.

An initial feasibility study, known as ‘Project Willow’, is assessing various low-carbon opportunities from technical, economic, commercial, regulatory, environment, community and skills perspectives, the company said in the release.

In a statement sent to Rigzone recently, UK union Unite “vowed to explore all avenues to preserve high quality jobs at Grangemouth”.

“Petroineos confirmed … that it intends to close the refinery at Grangemouth between April – June 2025 and become an import and export only facility,” the union added.

“The announcement places in jeopardy the jobs of the 500 workers directly employed (represented by Unite) at Grangemouth and thousands more in the supply chain,” it continued.

“There is widespread fury within the workplace due to the failure of the bosses and politicians to ensure the future of the site,” it went on to note.

In the statement, Unite General Secretary Sharon Graham said, “this dedicated workforce has 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”.

“This is now the last chance for this Labour government to show whether it’s really on the side of workers and communities. The road to net zero cannot be paid for with workers’ jobs,” Graham added.

“The government must put its money where its mouth is to ensure the jobs are safeguarded. This is the only refinery left in Scotland and it must remain. There are alternative plans,” Graham continued.

Unite said in the statement that it is now in high level talks with the government about alternatives for the site including the production of sustainable aviation fuel.

Rigzone asked Petroineos, the UK Department for Energy Security and Net Zero (DESZN), and Scotland’s Energy and Climate Change Directorate for comment on Unite’s statement.

Petroineos responded with its release. DESZN also sent Rigzone a release in response.

The release sent by DESZN noted that the UK and Scottish governments have announced a joint investment plan for Grangemouth following Petroineos’ decision to decommission its oil refinery.

“The UK government has been working with the Scottish government to deliver an investment plan that will help secure Grangemouth’s industrial future and protect its skilled workforce,” the release said.

This includes a GBP 100 million ($131.9 million) package that will “support the community and its workers”; “immediate career support for workers”; and “investment in the site’s long-term future”, the release outlined.

The release stated that the GBP 1.5 million ($1.9 million) 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.

In the release, UK Government Energy Secretary Ed Miliband said, “it is deeply disappointing that Petroineos have confirmed their previous decision to close Grangemouth oil refinery”.  

“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,” he added.

“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,” he continued.

Scottish Government Cabinet Secretary for Net Zero and Energy Gillian Martin said in the release, “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,” Martin added.

“We are working very closely with the UK government and together we have communicated our disappointment to Petroineos today,” Martin continued.

Martin said in the release that the Scottish government has consistently made clear its preference was for refining to continue as long as possible, adding “we have continued to press the shareholders for a positive decision until the 11th hour”. 

Martin also noted that the “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,” Martin said.

Rigzone has asked Petroineos for comment on the release sent to Rigzone by DESZN. At the time of writing, Petroineos has not yet responded to Rigzone’s request.

To contact the author, email andreas.exarheas@rigzone.com