News | Karen Turner | Nov 2023
News has broken about the future of the Grangemouth refinery and those people whose jobs and livelihoods depend on it. Reporting and communications about what is actually happening – or is going to happen - haven’t been as clear as they could be, and there’s also real danger a bigger story is being missed.
Let’s start with what’s happening at Grangemouth. It is important to be clear that we are talking about the Grangemouth refinery (owned and operated by Petroineos in partnership with PetroChina), which directly employs about 500 skilled workers, but supports several times as many jobs throughout Scotland and the wider UK economy because of supply chain links and where/how workers spend their wages. 400 of those jobs are at risk if the shift is to solely importing rather than refining fuels at the Grangemouth site – but I’ll come back to that later because I don’t think that is the only future activity on the current refinery site.
Not good news for the Grangemouth community or Scotland as a whole
However, let’s be clear that what has come out. There has been no announcement of a closure. Moreover, what is happening doesn’t affect the other fourteen hundred and fifty or so jobs across Ineos’s petrochemical operation (around 1000) or the Forties Pipeline (around 450), though, with latter involved in bringing oil in from offshore extraction, that will reduce over time.
This is not good news, and both our UK and Scottish Governments need to respond to ensure the best possible outcome for not only the people whose jobs and livelihoods are at stake, but also for Scotland as a whole, not least in terms of how we get our fuels.
Lessons urgently need to be learned
I believe there are crucial lessons for the ‘just transition’ here in terms of learning lessons. When I sat on the first Scottish Just Transition Commission a few years ago, we were urged by many people we talked with to ensure lessons are learned from unjust transitions experienced in the past, for example when the steelworks at Ravenscraig closed in the early 1990s.
But this latest news about the Grangemouth refinery suggests not enough has been learned. In short, there ARE things that policymakers at Scottish and UK levels could be doing here by way of policy signalling and support that could affect the picture here. The good news is that it is not too late, given that what Petroineos have ‘announced’ is a project to change – to transition - what is done at the refinery site at Grangemouth.
We know what we’re transitioning away from, but what are we transitioning to?
This transition – rather clumsily announced - is no doubt due to changing demand patterns and pathways in Scotland. This is the only market the refinery serves, and where the number of barrels refined per day have already declined by around 25% over the last few years to the current 150,000.
Here, 2025 has been stated as a point in time by which the Grangemouth refinery site could potentially shift over to becoming an operation that import fuels that have already been refined (outside of Scotland) to meet the demands of the Scottish market. However, it would also seem that there could be a future for refining at the Grangemouth site, not of petrol and diesel, but of low carbon fuels, e.g., biofuels. The problem is that if private sector actors are to be confident that this is an investable proposition, there is a need for supportive policy action and signalling (with clear action on the latter potentially reducing the cost of the former).
The challenge for Petroineos (and their PetroChina partners) seems to be that the costs of running a Scottish refinery – again, which entirely serves the domestic Scottish market – don’t line up with the changing demand profile. Part of this changing profile is due to the use of more efficient fuels (e.g., the ones with an E on front at the petrol station) and vehicles, but also because both our Scottish and UK governments have strongly signalled the intended phase out of the internal combustion engine. However, neither government has very effectively signalled what comes next, beyond electric vehicles, where there is already a mismatch in signalling and action in terms of commitment to and delivery of the necessary infrastructure.
This is a transition – action is required to ensure it is a ‘just transition’
In short, what is happening with the Grangemouth refinery should sound alarm bells of the pending risk of another transition mistake being made, and it should raise concerns that Scotland and the wider UK could be on a path that could involve a multitude of other errors with very real impacts on people’s lives, the economy and our climate impacts. We’ve got a historical list of lessons to learn from unjust transitions across the UK in the cases of steel production, coal mining, and renewables, all where jobs and value to our economy and society have been lost or not realised in the way we hoped.
That last example – renewables – constitutes an ongoing challenge in the case of much greener and increasingly lower cost energy where we are certainly exploiting our huge wind resource in Scotland, but without doing much of the required (and high value) manufacturing at home. We’re missing out something, with a ‘green economy revolution’ anticipated by other nations, not least the US with its Inflation Reduction Act.
Now our only Scottish refinery needs to transition as we move away from things that involve burning fossil fuels – but with no clear pathway as to what the refinery can transition to, beyond importing fuels (that we’ll still be burning for quite some time) from other refineries employing people and supporting wider economic communities in other countries.
If I were one of the 500 workers currently employed at the Grangemouth refinery, or someone employed in the Grangemouth or the multitude of other communities that indirectly benefit from activity there, or working in any sector where the transition to net zero will have an effect, I wouldn’t be very happy either. What’s the lesson emerging? That both our governments urgently need to get their just transition act together.