The owners of Scotland’s last oil refinery have confirmed it will close in 2025 with around 400 jobs set to be axed.
Grangemouth is slated to cease production in the second half of next year and will be transformed into an import terminal and fuel distribution hub.
A consultation has been launched with workers at the site but it’s expected only around 75 jobs will remain in the Falkirk plant.
It comes despite attempts by the UK and Scottish governments to save Grangemouth with talks ongoing throughout the last year.
In July, Scottish secretary Ian Murray had said a positive announcement about the future of the plant would “hopefully” be made soon.
It’s the only oil refinery left in Scotland and one of six in the UK, and currently supplies 65% of Scotland’s oil products, including petrol and diesel.
In response to Thursday’s announcement, the Scottish and UK governments announced a further £20m to secure a future for the workforce of the site. That will add to the £80m already confirmed by Westminster and Holyrood for the Falkirk and Grangemouth Growth Deal.
The Scotland Office said this would amount to £628m in economic benefits to the area while creating 1,660 jobs over the next 30 years.
Petroineos, the owner of the site, said it is the UK’s oldest refinery and cannot compete with bigger, newer refineries across the globe.
The company said: “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.”
It said it has invested $1.2bn since 2011 and has lost more than $775m since then.
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.”
Scottish 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.”
UK 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.
“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.”
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