Grangemouth transition: If not here, where?

When news broke that Scotland’s only crude oil refinery was to close, there was a fair amount of consternation from politicians.

Within hours, all five of Scotland’s main political parties had responded to the Grangemouth announcement.

The Scottish Conservatives pointed the finger at the Scottish Government’s “hostile attitude” to oil and gas. The Scottish Greens blamed the “fossil fuel fat cats” at owners Petroineos. Scottish Labour and the Scottish Lib Dems urged both of Scotland’s governments to come together to find a way through. First Minister Humza Yousaf pledged to work with the business and trade unions to ensure there was a just transition.

For Petroineos, the decision was purely a business one. Grangemouth has been operating at a loss in recent years; it’s an old plant which cannot compete with larger, more efficient sites in the Middle East; and then there’s the small matter of the energy transition which means demand for its product will fall.

The company intends to turn the site into a fuels import terminal, which will require only about a fifth of the refinery’s current workforce to operate. The precise closure date is yet to be confirmed, but it will leave 400 people out of work and have potentially devastating knock-on impacts on the community.

Future job opportunities, future industrial capacity and a just transition can be achieved for the area

What happens here will be Scotland’s first major test in how it manages the just transition to net zero.

The Scottish Government is set to publish its Grangemouth-specific just transition plan in the spring. “It will ensure that we are giving comfort to the communities and the people who are central to all of this that future job opportunities, future industrial capacity and a just transition can be achieved for the area,” then energy secretary Neil Gray told the Scottish Parliament’s Economy and Fair Work Committee late last year.

Locals, though, have been engaged with those issues for far longer. They see a just transition not just about workers, but as a chance to renew the fortunes of the town. Grangemouth Community Council played a central role in creating the local community action plan, backed by Falkirk Council, which sets out a vision for the town for the 2020s.

Walter Inglis, a community councillor, says the plan looks to “remodel the town and make it an exemplar for moving from the fossil fuel-based economy to a more sustainable, environmentally-improved economy, and how we could model a community to maximise that.”

He continues: “We’ve got to grasp the nettle now. What’s on offer, what’s in it for us? And let’s not make the same mistakes as we made in the past where the folks that actually stay here don’t benefit from it.”

As for the recent news about the refinery, Inglis says that “nobody has come rushing to our door to say, ‘what’s going to happen now?’” That’s because, he argues, the community has always been “working on the premise that change is going to happen. We’ve got to embrace it, maximise it, and try and drive it forward.”

Yet while this work is underway at local level, there is considerable concern about the lack of national planning for Grangemouth. The Grangemouth Future Industry Board (GFIB) was convened in 2020 by the Scottish Government, but only brought together public sector bodies – neither Petroineos, nor workers, nor locals were involved.

Inglis adds: “I asked right at the get-go, where’s the community element of that? Because when you look at the structures of it, it’s very strategic. It’s all about getting all the projects working in tandem rather than against each other or duplicating things. But you still ask the question, where is the community input?”

Trade unions were equally perplexed. GMB Scotland secretary Louise Gilmour says: “The voice of experts, the workers with that experience, should have been front and centre in recent years, whether on the Grangemouth Future Industry Board or any other forum looking at how the economic opportunities of renewable energy can be seized. There has been an awful lot of talk and far too little informed and effective action.”

We are years behind other countries in terms of investment and strategy, and falling further behind

Following the announcement in November, the GFIB was “repurposed” by the Scottish Government. The first meeting of the new group took place in mid-January and involved ministers from both governments, Petroineos, Falkirk Council and the trade union Unite.

But given the need for a just transition plan for the area has been known about for many years, questions have been raised about why it took so long to get all stakeholders round a table. An insider at Petroineos told Holyrood the company had to push forward with its recent announcement despite the lack of a clear policy because it was running out of time. The company estimates it will take 18 months to establish the import facility.

Still, Petroineos is optimistic about the GFIB now, with the insider saying it has “the potential to be transformational”. Yet with closure looming, that leaves little time for the government to rise to the challenge.

That speaks to wider concerns about the just transition for Scotland. Gilmour says: “We are years behind other countries in terms of investment and strategy, and falling further behind with every year that passes when we see only policy documents and briefing papers instead of robust plans to create skilled, well-paid jobs.”

While she welcomes the promise of £500m to support the renewables supply chain – announced by Yousaf at the SNP party conference last autumn – she says this was “far too late and must now be spent strategically, at pace and with one clear purpose and that is the creation of energy and manufacturing jobs in Scotland.”

What happens at Grangemouth in the coming months will be seen as a test of the commitment to a just transition. Richard Hardy, who sits on the Just Transition Commission – an advisory body providing scrutiny and advice to Scottish ministers – says: “Grangemouth is quite iconic in relation to Scottish heavy industry. If we don’t do it here, we’re not going to do it anywhere else – so we may just give up.”

Alamy

Hardy, who is also the national secretary for Scotland at trade union Prospect, adds: “From the perspective of where I come from, people within the trade union movement are saying it’s becoming very obvious that the Scottish Government has known about this plan for some considerable time and whilst they were perhaps not expecting the announcement in November, there have clearly been conversations between Petroineos and the Scottish Government going back at least 24 months.

“And yet in that 24 months, nothing appears to have happened. No steps were taken, nothing was accelerated or brought forward by the Scottish Government. We, the Commission, weren’t made aware that we needed to potentially bring our work forward from March of this year.

“And so it’s the way that is perceived, that despite conversations going on this seems to have caught Scottish Government by surprise. We’re now rushing to catch up to save a thousand jobs, if you look at the supply chain, in a local economy that is heavily dependent upon high-carbon jobs, which will need to transition. There isn’t a plan.”

Local MSP Michelle Thomson agrees not enough has been done to get the area to the point of transition. “Were all the elements in place? Well, no, I would say they weren’t. Do we have a sufficiently clear understanding of the processes that need to be in place? No, we definitely don’t. Were all the key stakeholder groups and the right bodies to facilitate that involved? No, not that either.

“But I do also recognise that this is easy to talk about and difficult to do. And this isn’t just Scotland that’s struggling with this. This is all over the world. How do you get that transition? It really is a hard nut to crack.”

We do struggle and don’t really get the strategic-level engagement that we need

She is currently urging the UK Government to alter the regulations around sustainable aviation fuel, which could allow the site to become a biorefinery. This could, she argues, provide some breathing space for the community while governments and other stakeholders can get the pieces in place for a wider transition.

Holyrood understands that, under the current policy framework, the site would be unlikely to reinvent itself as a biorefinery before 2028. Petroineos is likely to cease refining operations in May 2025 – when the license for its crude distillation unit (CDU) expires. That gap, if nothing is done, could be hugely detrimental to both the area and the sector’s confidence in the just transition.

The decision on the £40m CDU license will be made this summer. Insiders say Petroineos would only choose to make that investment if there was reasonable certainty that cash would be recovered – and at the moment, that does not exist. They believe there are three options for the governments: do nothing, and therefore lose 400 jobs; extend the life of the refinery; or accelerate the path to low-carbon solutions.

UK ministers have rejected the idea of investing in the site to keep it afloat, with energy security minister Graham Stuart telling the parliament’s economy committee that it would not be “a sensible use of British taxpayers’ money”. In any case, Petroineos has not approached the government with a request for financial support.

And while Stuart went on to tell MSPs there was “a great deal of potential” for turning the site into a hub for biofuels, hydrogen or sustainable aviation fuels, the minutes from the first GFIB meeting reveal the UK Government is “unlikely” to reshape national policy “unless it is applicable to all parts of UK”. Stuart “cautioned that attendees should be aware that changing national policy will be difficult.”
Graham Stuart is UK minister for energy security

This overlap of devolved and reserved powers is another challenge facing Grangemouth and Scotland. The Scottish Government is responsible for both climate change policy and local economies, yet the bulk of energy policy remains reserved to the UK Government. This makes the establishment of an overarching strategy even harder.

Jamie Baker, of industry body Fuels Industry UK, says that while the sector has “really good relationships” with both governments on single issues, engaging with either on the long-term outlook is difficult.

“It’s often one of those areas which isn’t really owned by any single person. We in the refining and fuel business are affected by all kinds of different policies. We speak with people who work in transport, we speak with people who work in carbon capture and hydrogen, we speak with people who care about the apprenticeship levy, we speak to people who care about tax, and so on and so forth…

"Because there isn’t a single ownership, and because there isn’t necessarily a clear steer as to what demand in our sector is going to look like, I think it’s fair to say that we do struggle and don’t really get the strategic-level engagement that we need.”

If we don’t get it right for Grangemouth, why should oil workers believe that a just transition is going to happen

While the Just Transition Commission is focused on Scotland, Hardy highlights that the lack of action is “not entirely the Scottish Government’s fault”. “This is going to cost a lot of money. They don’t have borrowing powers, they don’t have the ability that other governments or national governments have. They are hampered by a UK Government that really probably sits on the climate-sceptic side of any conversations around this and certainly doesn’t like to spend money on anything.

“We’re then just left, in my opinion, beholden to the operation of the market and inward capital investment, foreign capital investment to deliver this. And everything says they haven’t delivered it yet. Every transition that that market approach has delivered hasn’t been just. If you look at the end of coal – unjust; the end to shipbuilding – unjust; the end of steelmaking – unjust.”

Friends of the Earth Scotland (FOES) agrees, and in a submission to the parliament inquiry about Grangemouth the environmental group warned politicians against making the “assumption that a just transition is going to happen” because there were “not many signs for confidence”.

Rosie Hampton, FOES just transition campaigner, adds: “It’s the lack of planning, it’s the lack of foresight, it’s a lack of meaningful not only consultation, but worker involvement in planning the just transition process, all of which we argued at the time was integral to even just making the first step to realising what a just transition could look like – not just for the refinery site but the whole of the Grangemouth area.

“And then lo and behold, inaction on the part of Petroineos – because they have no incentive to, arguably – and also a hands-off approach by the Scottish Government has meant that they’ve pulled out the rug from under everybody. And now we’re looking at a transition being done at the whims of a private company, at the whims of a market, and doing nothing for the climate, and absolutely nothing for the workers at the refinery.”

Failure to create a just transition for Grangemouth could create huge problems. Hardy warns it could even result in workers and trade unions concluding they should “walk away” from the transition and “fight to keep their jobs”. He adds: “If we don’t get it right for Grangemouth, why should oil workers believe that a just transition is going to happen? Why should other workers at Grangemouth in the non-refinery part, in the plastic side, believe that just transition is going to happen? Why should workers at Mossmorran believe that a just transition is going to happen? Where are the examples of what a good just transition looks like?”