Petroineos to halve capacity of Scotland’s sole oil refinery

Petroineos plans to shut almost half the capacity of Scotland’s only oil refinery with the loss of up to 200 jobs, as the hit to fuel demand from the coronavirus pandemic slashes profits across the industry.

The permanent shutdown of two units at the Grangemouth site comes as refining margins come under severe pressure, triggering a spate of plant closures around the world.

The 210,000 barrels-a-day refinery near Falkirk, which the joint venture between Ineos Group and China’s state-backed PetroChina bought in 2005, has long been seen as vulnerable to cuts given its age. Refining first started on the 1,700-acre site in 1919, and was for decades run by BP.

Ineos founder Jim Ratcliffe is one of the UK’s richest men, having built his empire through acquisitions of refining and petrochemical assets jettisoned by the oil majors over the past two decades. In July Ineos bought the remainder of BP’s petrochemicals business for $5bn.

Grangemouth provides about 70 per cent of Scotland’s fuel supplies, with shipments also going to Northern Ireland and the north of England.

“As a national critical infrastructure it is vital we retain a productive capacity of fuels in Scotland,” said Franck Demay, chief executive of Petroineos Refining.

“We firmly believe that only by taking action now will we preserve one of Scotland’s last large manufacturing sites and a significant contributor to the Scottish economy.”

The plant will have 450 employees after the closures, the company said.

The two parts to be shut, which are both 70 years old, are a 65,000 b/d crude distillation unit and a 25,000 b/d fluid catalytic cracker used in the making of petrol. Both had already been mothballed in recent months due to the drop in fuel demand.

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Refineries in Europe are facing greater competition from newer plants in North America and Asia with greater efficiency and capacity, while fuel demand is under long-term threat from the rise of electric vehicles.

The Unite union criticised the plans as “premature”, given the extension of the government’s furlough scheme and hopes the pandemic could soon be brought under control.

“We are acutely aware of the very challenging market conditions brought about by the Covid-19 pandemic that has resulted in a lower demand of fuels but there is now a vaccine within grasp which could significantly effect demand in the coming months,” said Sandy Smart, Unite industrial officer.

“It’s our belief that these job losses can be averted and we call on Petroineos to work with us to deliver this objective.”

In 2013 Sir Jim threatened to shut Grangemouth as an industrial dispute with Unite came to a head, threatening 800 jobs, before the union backed down.

Additional reporting by Michael Pooler in London



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