Scottish Parliament statement on Grangemouth Industrial Cluster - Sep 17

The Acting Cabinet Secretary for Net Zero and Energy (Gillian Martin)

The Parliament will be aware that Petroineos, the owner and operator of the Grangemouth refinery, has confirmed its intention to cease refining in quarter 2 of 2025. It is a matter of deep regret that Petroineos has not opted to continue operations at the site for longer, despite the efforts of the Scottish Government and the United Kingdom Government to urge it to do so. However, we both recognise the commercial nature of the decision.

I met Petroineos chief executive officers on Thursday, shortly after the announcement, and conveyed my deep disappointment about the decision. They informed me that the decision had been taken on the basis of the viability of the refinery, informed mainly by a challenging market outlook that it and other such refineries face.

I pay tribute to the workforce at the refinery. It is a highly skilled workforce and has been intrinsic to Grangemouth's status as Scotland's foremost industrial concentration. I recognise that the announcement means a most concerning time for those workers and their families, and I put on record my gratitude to them for the role that they have played in meeting Scotland's fuel needs over many decades.

I assure members that I have made it clear to the business that, regardless of the status of the refinery in 2025, it has a duty to the workers now. I expect the business to actively explore all options to identify new roles across the Grangemouth cluster for those affected by the asset's closure. I have also asked all partners of the Grangemouth future industry board to do the same.

I give my commitment that the Scottish Government will also do all that it can to support those workers. I can confirm that we have enacted our partnership action for continuing employment initiative and stand ready to offer support.

On Friday, the First Minister met workers, union representatives, Falkirk Council and community representatives to hear at first hand their concerns about Petroineos's decision, and he reaffirmed the Government's commitment to doing all that it can to secure a long-term future for the industrial cluster. In addition to that, members will note the commitment that the Scottish Government made last week to put in place a targeted skills intervention to support those who are impacted by the asset's closure. That will be supported by up to £500,000 of additional Scottish Government investment. We will work closely with business and trade unions to ensure that that meets the demands of the workforce.

I recognise that vast numbers of people in the wider community rely on the refinery for their employment. We will therefore engage constructively with Falkirk Council, businesses and other stakeholders to consider all possible actions to mitigate any impact of the refinery closure on the economy of the wider Falkirk area.

We have announced significant investment in the Falkirk and Grangemouth growth deal of £100 million across the Scottish and UK Governments. The funding will support economic development in the area that will support securing a long-term future for the Grangemouth refinery. Members will be aware that the Scottish Government has already provided material support for low-carbon projects, and the UK Government has confirmed that it will join us in supporting Petroineos's project willow study. Our joint £1.5 million grant is enabling Petroineos to progress that cross-site study, which will examine the enablers and blockers to transforming Grangemouth into a low-carbon fuels hub. The study will conclude early in the new year, but it has already identified a shortlist of three credible options to begin building a new long-term industry at the site, including low-carbon hydrogen, clean e-fuels and sustainable aviation fuels.

We have also provided £2 million to fund the initial phase of National Gas Transmission's feeder 10 project, which would see an existing gas pipeline between Grangemouth and St Fergus being converted so that it can transport captured carbon dioxide to the Scottish cluster. That demonstrates our commitment to evacuating emissions from the central belt and supporting the development of the Scottish cluster.

I know that many will be concerned about what this means for the future of crude oil that is extracted in the North Sea and transported to Grangemouth, so I want to allay those concerns. As outlined in the Scottish Government's draft energy strategy and just transition plan, oil that is extracted from the North Sea is predominantly exported to international markets. The Scottish Government anticipates that that arrangement will continue and that North Sea oil will continue to be refined in a number of international locations.

There is no doubt that all routes to Scotland reaching net zero rely on decarbonising Grangemouth, as it is responsible for 27 per cent of Scotland's industrial emissions. The Scottish Government has been and remains committed to securing a long-term and sustainable future for the Grangemouth industrial cluster and our draft Grangemouth just transition plan sets a clear strategic direction for its future. The plan will recognise the significant role that the cluster and its workforce has played to date, as well as the important role that it will play in the future. I know that members will look forward to engaging with the draft plan in due course.

It is my firm belief that there is a future for Grangemouth where the cluster can play a key part in Scotland's energy transition. However, as we have made clear previously, our fiscal and regulatory autonomy in this area is limited and, therefore, the Scottish Government cannot do it alone. The future of the Grangemouth industrial cluster is clearly a shared interest for the Scottish Government and the UK Government. I have to report that I am encouraged by the UK Government's commitment to exploring the possibility of supporting the future stages of low-carbon projects at Grangemouth via the national wealth fund, and I am committed to working with it to play our part.

In the coming weeks and months, it will be critical for all stakeholders to play their part to support the workforce and secure a long-term future for the site. I call on those with a vested interest across the chamber and beyond to work with me to secure a future for the site that aligns with our shared ambitions for the area. I have already initiated a series of engagements with key stakeholders. In the coming weeks, my full attention will be on mitigating as much of the negative impact of the decision as possible.

I conclude by once again placing on the record that my thoughts are with the workforce. I give the assurance that the Government will do all that we can to mitigate the impact of the commercial decision by Petroineos. I call on Petroineos to ensure that it handles the next phase of the process with care and respect for its workforce and the wider economy while being conscious of its responsibilities as an operator.

The Presiding Officer (Alison Johnstone)

The cabinet secretary will now take questions on the issues that were raised in her statement. I intend to allow around 20 minutes for questions, after which we will move on to the next item of business. I would be grateful if members who wish to put a question were to press their request-to-speak button.

Douglas Lumsden (North East Scotland) (Con)

I thank the cabinet secretary for advance sight of her statement.

This is bad news not just for the hundreds of workers—and their families—who are directly employed by Petroineos but for the wider supply chain in the area. However, the news is not unexpected to the devolved Government. Michael Matheson, the former Cabinet Secretary for Net Zero, Energy and Transport, met Petroineos as far back as February 2022 and discussed options for a just transition for Grangemouth workers. In addition, we had a statement in February this year from Màiri McAllan. The Government has known that the situation has been coming for the past 31 months, but it seems that little has been done to prepare for the future, with the acting Cabinet Secretary for Net Zero and Energy admitting last week that project willow was only just starting. Why has the Scottish Government achieved so little in the 31 months that it has known that this was coming? Will the Scottish National Party Government accept responsibility that it is its narrative and its presumption against oil and gas that has got us to where we are now? The SNP is driving away investment and driving away jobs.

Gillian Martin

I do not accept that at all. The Scottish and UK Governments have been part of the Grangemouth future industry board for the past 18 months. In that time, the Scottish Government has made clear its intention to support the Falkirk and Grangemouth growth deal and to put funding on the table for project willow, at the request of Petroineos. Even before project willow, the Scottish Government provided funding to Petroineos to investigate the transition to a biorefinery. That is a study and a piece of work that it was working on well before any of these decisions were made.

I gently say to Douglas Lumsden that there was a bit of a sea change in July when I talked to my counterparts in the new UK Government, who actually stumped up the money to match our commitments. I note that that money was never pledged by Douglas Lumsden's colleagues when they were in power. That is a matter of deep regret for me, because, if project willow had been funded by them, it could potentially have been under way a lot quicker. However, we are where we are.

In July, I got a pledge from Ed Miliband that he would match fund us not just on the project willow study but on the Falkirk and Grangemouth deal, which would add an additional £10 million from both Governments to engage specifically in projects in the Grangemouth community.

Did we know that the refinery was going to close? Yes, because Petroineos told us back in November. It told us of its plans to turn the refinery into an import terminal. Have we been working with it at pace ever since? Yes, we have. However, I have to tell Douglas Lumsden that, in November and beyond, the Scottish Government representative on that board might as well have been on their own, because there was nothing coming from the Tory UK Government at the time—absolutely nothing.

Daniel Johnson (Edinburgh Southern) (Lab)

I thank the cabinet secretary for advance sight of her statement. More importantly, I associate myself with her statement of solidarity with the workers. This is a deeply troubling time. Indeed, trade unions in recent days have expressed frustration with both Governments and, given the statement that we got from Petroineos, we need to be reflective of that frustration.

The cabinet secretary has already answered this in part, but we have heard much about the intensive engagement between the UK and Scottish Governments in recent days and about project willow, so will she outline the volume, focus and frequency of those meetings to enable us to understand that every effort has been made? What prevented the efforts in project willow from being taken forward prior to recent weeks and months?

It has been clear for more than 10 years that something would have to happen at Grangemouth, but the future industry board was convened only at the end of 2020. What efforts did the board make to secure long-term investment and could that initiative have been started earlier?

Gillian Martin

Daniel Johnson asks a number of questions. I will try to remember and to come to all of them. I will work my way backwards from the question about future investors.

The refinery is a joint venture between PetroChina and Ineos, which own and operate the site, so any investment decisions are for them. During our many meetings with Petroineos and the Grangemouth future industry board, we have always been clear that we wanted to see them maintaining the refinery for as long as possible, that we wanted to interrogate their plans for an import terminal and that we wanted to ensure that the refining of natural gas and oil would be extended for as long as possible. They were never really in a position to give us a date for when that would cease, but, after they made the announcement in November, the writing was on the wall, even though we wanted them to extend refining further.

The member asked about the frequency of meetings. The Grangemouth future industry board meets every three months, with both Governments and a lot of stakeholders also involved. There have also been discussions with Petroineos to try to get a flavour of what it would do, whether and when it would make an announcement and what that would involve. We have also had meetings with Petroineos about its proposals for an import terminal, to ensure that we were content with those.

Since the new UK Government came in, I have had meetings probably once or twice a week. It was at the top of the agenda for discussion when the First Minister met the Prime Minister the day after the general election. We have not been sitting still, but something has troubled us. The member asked whether project willow could have started. That project was in the second tranche of the work by Petroineos. We have part funded the work on what would be needed to convert Grangemouth into being a biorefinery. That work also had to come to fruition. Petroineos has done a great deal of work on the options and has put the results of that study to its joint venture partners, who will have a view on whether that is an investable proposal.

Unfortunately and regrettably, the shareholders have taken the decision to stop refining, but I see a future for Grangemouth as a biorefinery. Believe you me, I am interested in anyone—whether that is Petroineos or anyone else—who comes forward with proposals either to extend the life of the refinery or to turn it into a biorefinery.

Michelle Thomson (Falkirk East) (SNP)

I have a short question about what might occur in future. Has the cabinet secretary explored with Petroineos the possibility that the shares held by PetroChina might be sold, thus leaving Ineos with a slightly different proposition to consider? I am not saying that that will be the case but that all those potential business options must be on the table.

Gillian Martin

As Michelle Thomson will understand, when two organisations are part of a joint venture there will be some things that they want to say and there will be commercially sensitive things that they will not want to say. There are some meetings where both members of the joint venture will be there.

Whatever PetroChina decides to do is a matter for that company. Ms Thomson is the constituency member for the area and I know that she has met Petroineos many times, so she should ask that question directly because I cannot answer it. Commercial decisions have been made by both partners in the joint venture. I do not know if they would tell an elected member—or anyone—about the split of shares, but that is up to them. I cannot speculate about that and do not think that I would have any part whatsoever in it.

Whether skills training is done by Petroineos in-house, by Forth Valley College or by the coming together of both entities is for all of us in the GFIB to work out. I will take my lead from Forth Valley College and Petroineos on all those matters

The member asked what difference my statement makes. My statement is a second opportunity for elected members to ask me about what is going on. I was pleased to spend time with not just MSPs but MPs on Friday afternoon, to work through a lot of their questions. We extended our session to allow more questions to be asked. Members may not have had a look at their email, but we have sent out some of the questions that we could not answer, or did not have time to answer, on that day, so that members will have a better flavour of some of the things that we are doing in that space.

Audrey Nicoll (Aberdeen South and North Kincardine) (SNP)

The early authorisation of the Acorn carbon capture project in Aberdeenshire would be a significant boost to efforts to find new opportunities at the Grangemouth site. Will the cabinet secretary provide an update on the latest engagement with the UK Government with a view to securing the approval that is needed?

Gillian Martin

I agree with Audrey Nicoll that carbon capture, utilisation and storage, and the acceleration into track status for the Acorn project and the wider Scottish cluster is imperative. It was good to hear Michael Shanks on the BBC—I think that he followed me directly on The Sunday Show—talking about that as a potential priority for the UK Government.

We have had conversations about that. The UK Government knows how important it is to get track status for the Scottish cluster. It will make a material difference to getting carbon out of the atmosphere and out of our industries in Scotland, but it will also make a material difference in the UK's drive to net zero. I am having a lot more constructive conversations about that. I will keep Audrey Nicoll up to date. I know that she has a particular interest in the issue, as do I. Things in that space are looking a lot better than before.

Gillian Mackay (Central Scotland) (Green)

The solidarity of all members should be with the workers at the refinery. I am pleased to hear that work is on-going to support those workers, and we should engage with the unions to ensure that that support has the desired effect.

When the Longannet power station closed, there was a similar strategy of money being invested in industry in the wider area; however, very little made it to small local businesses that relied on the power station. What lessons have been learned from that, to ensure that small businesses receive the support that they need, and what is being done to engage with the community on the changes that it is likely to see?

Gillian Martin

Those are all very valid questions. Gillian Mackay will have heard me say that the Federation of Small Businesses is a core member of the Grangemouth future industry board. I am very alive to the fact that not just the workers in the refinery but people in the supply chain are worried about their future. A lot of them are in small or medium-sized businesses, and they are very much in my mind.

That is why the growth deal is so important; it is not necessarily just a response to the refinery closing. The impact of anything happening in that industrial site will have a much longer reach. I am therefore committed to making sure that we do not concentrate just on what is happening with the refinery, important though that is; that the workers have jobs at the end of the process; that as many of those workers as possible are involved as much as possible in the decommissioning process; and that their redundancy packages are what they should be.

I am also committed to making sure that people in the wider supply chain have an in to discussions with me and stakeholders—[Interruption.]—including the UK Government, the Scottish Government and, crucially, Scottish Enterprise, about what that means for them and how they it can access support if they need it.

Clare Adamson (Motherwell and Wishaw) (SNP)

I apologise for my alarm having gone off. As someone who represents Motherwell and Wishaw, I know only too well the devastation and the impact of deindustrialisation in my area, with there having been no fair transition at all for the supply chain and the workers. I share the minister's concerns—and others that have been expressed—for the workforce in the area.

In this situation time is of the essence, so securing the future industrial unit, the industrial work at Grangemouth and the highly skilled workforce for that area has to happen as quickly as possible. Can the minister give any indication about when the proposals that are being examined by project willow will be completed and when the information will be forthcoming?

Gillian Martin

I want project willow to report early next year. I do not want it to wait until spring, but want it to be accelerated. I want the report to be thorough and to consider the questions that Clare Adamson asked.

As I said to Sarah Boyack, project willow will look not only at the three front-running strands of potential future work for the site, but at the skills assessment. A great deal of work has already been done on the skills assessment. I was told by Petroineos—it must have been last summer—about the transferability of the skills of its workforce if the site were to become a biorefinery. However, I am concerned that, once we have lighted on the potential, we minimise the gap between the cessation of refining in its current form and attracting inward investment. Regardless of whether that investment comes from Petroineos or somebody else, I want the gap to be as short as possible.

Clare Adamson has my word on my commitment to that. I also originally come from an area that did not have a just transition. We will never do what Margaret Thatcher did, because we know that the consequences last for decades. She has my absolute commitment that I will ensure that Grangemouth has the full effort of the Scottish Government. It will work in partnership with whoever is serious about turning the Grangemouth site into a biorefinery, a sustainable aviation fuel hub or a hydrogen production hub—whatever will get us the maximum economic activity for the highly skilled workers whom we want to retain in the area for as long as possible.

The Presiding Officer

I am keen to take questions from members who have pressed their request-to-speak buttons, but I will require more concise responses, cabinet secretary.

Liam McArthur (Orkney Islands) (LD)

Like others, the Scottish Liberal Democrats recognise that it is an extremely worrying time for everyone who is connected with Grangemouth—its workers, the community and businesses up and down the supply chain. It is the single biggest test of the just transition to date, with hundreds of jobs, credible skills and the vibrancy of the community at stake.

The cabinet secretary referred to the credible options in low-carbon hydrogen, e-fuels and sustainable aviation fuels. However, she will recognise that, with the passage of time, retaining those skills and even persuading people to remain in the area will become ever more difficult. Can she give a more precise timeframe for the progress that she expects to be made in those three key areas?

Gillian Martin

I cannot commit to a timetable, because the Government is not the only party involved. However, I can tell Liam McArthur that there are other streams of work. Scottish Enterprise has been involved in attracting inward investment to the wider site, and it is accelerating that and focusing on attracting inward investment and setting out the stall.

Grangemouth is geographically and infrastructurally perfectly placed to be a sustainable aviation fuel hub, a hydrogen production hub and an e-fuels hub. The relevant infrastructure, skills and people are there. Any organisation that is interested in investing in such things should be considering Grangemouth, because it has all the component parts. It is an extremely competitive option.

We all speak to airlines; I am always interested to know what they are doing in relation to sustainable aviation fuel. I was told by a representative from Heathrow that it cannot get enough sustainable aviation fuel to meet its ambitions. That says to me that there is a very viable proposition there for someone who is looking to invest in Grangemouth.

Graham Simpson (Central Scotland) (Con)

The problem is that sustainable aviation fuel is not manufactured in Britain. We need to have it manufactured in Britain, and we should have it manufactured in Scotland for strategic reasons. I have been saying that for a long time. The previous UK Government did not do nearly enough on that. What does the Cabinet Secretary think needs to happen to get SAF manufactured in Grangemouth at speed? We do not need a Government report to know that; we already know that it needs to be done.

Gillian Martin

I agree with Graham Simpson. Regulations in the reserved space could have been modified to release the hydrotreated esters and fatty acids—HEFA—cap, for example.

One interesting conclusion that has come from Petroineos's work on using the site as a biorefinery is that not just feedstock from vegetation could be used for SAF purposes; it has discovered that an awful lot of other materials could be used for that.

If someone wants to create a hub for sustainable aviation fuel in Scotland, they will have our support as far as possible. I believe that they will have the support of the UK Government, too. Our door is open, and Scottish Enterprise will be delighted to speak to anyone who has a proposition.

However, the current owners carried out a feasibility study on refining and still decided to stop doing so, which is regrettable. Could something happen in the intervening period? Could Petroineos decide that it wants to turn the plant into a biorefinery? Those are questions for Petroineos, but they concern a commercial field that will absolutely be supported by the Scottish Government and the enterprise agencies.

Emma Harper (South Scotland) (SNP)

The cabinet secretary has, rightly, mentioned the fact that the workforce at Grangemouth is highly experienced and has vital transferable skills and expertise that could be used in other parts of the energy sector. Can she provide further detail on how the Government can support the affected workers in finding new employment?

Gillian Martin

I mentioned the skills package that we have put in place. I am hopeful that Petroineos will also put funding into that package so that we can augment the offer.

We have funded a £4 million skills transition centre that will use state-of-the-art equipment to respond to the needs of emerging sectors, such as the ones that we want to encourage into the larger Grangemouth site. However, an awful lot more work is happening in the Grangemouth site than just refining—for example, chemicals production. I am interested to hear from Petroineos how many people it will be able to redeploy to that area of its business.

We want to ensure that we attract inward investment and help to plug any skills gaps that there might be. The fact of the matter is that we are talking about people who are already highly skilled. As other members have highlighted, the biggest danger is that those workers will be snapped up. We want to ensure that we minimise the gap between activities, so that those workers do not leave the area and we retain the skills base at Grangemouth.

The Presiding Officer

That concludes the ministerial statement on securing a sustainable future for the Grangemouth industrial cluster.