Grangemouth: Can industrial manufacturing and climate action go hand in hand?

The site is considered an important “infrastructure asset”, hosting Scotland’s only oil refinery, its biggest petrochemical plant and a North Sea pipeline terminus.

The cluster is of significant economic value, generating around four per cent of Scotland GDP and supporting thousands of jobs.

But it is also one of the country’s biggest climate polluters, responsible for releasing around three million tonnes of greenhouse gases into the atmosphere each year – around six per cent of Scotland’s total emissions.

Today the businesses are at a crossroads, facing mounting challenges due to the availability and costs of raw materials – oil and gas – and the need to slash their environmental impacts in the drive for net zero. 

The refinery is currently earmarked for closure, putting around 500 jobs at risk.

However, new Prime Minister Keir Starmer has pledged to help save jobs and safeguard the site, with a vision that it will become a hub for “the energy industries of the future”. 

But what would that mean? And could ‘dirty’ Grangemouth have a role to play in the clean, green revolution?

Grangemouth cluster

The site, Scotland’s largest container port, is currently home to three businesses.

The Forties Pipeline System (FPS), which transports around 40 per cent of the UK’s oil and gas from the North Sea to the mainland, and Olefins & Polymers UK (O&P UK), a petrochemicals facility that makes products used in medical, construction and automotive applications and packaging. Both are operated by Ineos, owned by billionaire businessman Sir Jim Ratcliffe – one of Britain’s richest men.

The refinery – one of only six in the UK and the only one in Scotland, with capacity to process 150,000 barrels of crude oil every day – is run by Petroineos, a joint venture between Ineos and PetroChina.

Between them the companies directly employ around 2,200 workers, as well as up to 3,000 contractors on any given day.

Climate change impacts

Burning of fossil fuels is the key driver of human-induced climate change, creating atmospheric greenhouse gas emissions that raise global temperatures and cause an increase in extreme weather events.

After transport, the industrial sector is one of the largest sources of emissions in Scotland.

The Grangemouth site is the second biggest single emitter, producing around three million tonnes of carbon dioxide annually – with Ineos and Petroineos responsible for about half each.

Scotland has set a legally binding target to reach net zero, where emissions released are equal to or lower than the amount absorbed, by 2045. The UK date is 2050.

Government advisers at the UK’s Climate Change Committee have recommended that a specific focus on the Grangemouth cluster is key to industrial decarbonisation in Scotland and achieving the country’s green targets.

Decarbonisation pathways

Over recent years, the companies have been working to slash their climate footprint.

Ineos has pledged to be climate-neutral in Grangemouth by 2045, with a 55 per cent reduction from 1990 levels by 2030. Since taking ownership of the facility in 2005, the company has reported cuts of 37 per cent from 1990 levels. 

Ineos is working on several projects aimed decarbonising operations, including a new energy plant that will run on ‘blue’ hydrogen, development of carbon capture and storage technology, further investment in electrification and switching to recycled or bio-based feedstocks.

Petroineos recently announced plans to end petroleum refining at Grangemouth by next spring, blaming high running costs, and change operations to become an import and export terminal for pre-processed fuels.

The firm said the figures no longer add up, with more than £1 billion invested and losses of £600 million since 2011.

Around 500 jobs are likely to be axed if the move goes ahead, although the company has said “the closure decision has not been completely made”.

Suggestions for safeguarding a future include setting up a biorefinery to make sustainable aviation fuel. 

So what does the new Labour government plan to do?

The UK’s new Labour Prime Minister and his team have come out guns blazing on their mission to transform the country after 14 years of Conservative rule.

Among the party’s top priorities are “kickstarting economic growth” and turning the UK into a “clean energy superpower”.

Moves will include the establishment of Great British Energy, a publicly owned clean power company that aims to cut bills and boost energy security – paid for by a windfall tax on oil and gas giants. 

Ed Miliband has been installed as energy security and net zero secretary, and a new clean power Mission Control has already been set up – with a goal to “turbo-charge” the shift away from volatile international fossil fuel markets to home-grown eco-friendly power by 2030.

And Scotland looks set to play a key role in plans, with Great British Energy to be headquartered north of the border.

The new PM wasted no time demonstrating he means business, landing in Edinburgh last Sunday in the first visit on a whistlestop tour of the devolved nations following his election.

Sir Keir met with First Minister John Swinney to begin discussions on how the two governments could work together, with Grangemouth among the hot topics.

“I’m very concerned about the situation at Grangemouth,” he told reporters during his visit.

“I’m now Prime Minister and it’s my duty to do what I can to ensure that jobs are preserved and that the future is as good as I’m sure it can be.

“I won’t go into the details, but it is a real priority for me.”

The PM’s visit to Scotland, within the first 48 hours of taking on the role, was a “positive sign”, according to Scottish Labour deputy leader Jackie Bailie.

“It’s early stages but my understanding is both the UK and the Scottish governments are committed to working together,” she said.

“We would use the convening power of government to get people around the table in the short-term, but it is about building a long-term future for the site.

“That’s an area where we can work together with the SNP to ensure that we are protecting jobs.”

So where does the Scottish Government fit in?

Scottish ministers have been involved in ongoing talks with Grangemouth bosses, unions and Westminster leaders in a bid to find solutions for the refinery and protect workers. 

A draft Grangemouth Just Transition Plan is due to be published shortly and will include a “first-of-its-kind vision for the site”, outlining the long-term net zero operations it is hoped will take place there by 2045.

Gillian Martin, Scotland’s acting energy secretary, said: “The Scottish Government has been clear that it wishes refining at Grangemouth to continue for as long as practicable and recognises that site and its workforce are crucial to Scotland’s economy and our transition to net zero. 

“We are committed to working collaboratively with Petroineos, UK ministers and Unite the Union to explore the options available to secure a long-term, sustainable future for the site and accelerate new employment opportunities.

“There is a huge opportunity for Grangemouth to be at the heart of low-carbon fuel production and carbon capture, usage and storage, and I am pleased to have had early constructive discussions with UK secretary of state Ed Miliband about this over the past week and welcome his constructive approach to seeking a long-term, sustainable future for Grangemouth.”

Can heavy industries continue in a net zero society?

Andrew Gardner, chief executive of Ineos FPS and chair of Ineos O&P UK, has warned that closing down operations at Grangemouth could have two major consequences for Scotland and the UK – big losses to the economy and displacement rather than reductions in environmental impacts. 

“We should be passionate about manufacturing and we should be passionate about decarbonising,” he said.

“In the UK and Europe we have probably the strongest decarbonisation legislation available. 

“What we need to do is continue to manufacture here while decarbonising, taking carbon out of the atmosphere. 

“What is not good is if we just stop manufacturing and just import our goods, everything we currently make, from overseas – possibly from countries which are not cutting emissions.

“The best thing for the planet, and for all of us, is to keep manufacturing in the UK while we are regulated to decarbonise, rather than importing all our products and offshoring the associated emissions.

“If the refinery closes in one or two years, it will halve its carbon carbon footprint.

“But that’s not a good halving of carbon. The emissions would still be produced, just somewhere else.”

He said Ineos “is absolutely positive about” the Labour government’s pledge to support Grangemouth and to work with Scottish ministers on securing the site’s continuation – “if they mean it”.

He said: “I really hope that they will work together and actually support that vision of making Grangemouth an energy hub of the future, which means a low-carbon future, not just an energy future, which we absolutely support and is a journey we have been working on.

“Maybe now, if both governments are working together, we can really fully kick-start that.

“We actually really do want to change – because it’s the only way to survive.

“I think this is an opportunity we should grasp.”

Petroineos bosses have welcomed the new PM’s “strong expression of support for the workforce” at Grangemouth and said they are looking forward to discussing in more detail a future transformation of the refinery and other green opportunities.

A spokesperson for the company said: “Petroineos is exploring a range of low-carbon investment opportunities for future manufacturing at the Grangemouth industrial cluster, which is well placed to support energy-related activity for decades to come. 

“That will require a new partnership approach between both UK and Scottish governments and industry and it has been pursuing that actively with governments at both Holyrood and Westminster for several months now.”

The future  

Union leaders say early signals from the new leadership are encouraging. 

Derek Thomson, Scottish secretary for Unite, said: “Unite warmly welcomes the Prime Minister’s resolve to protect jobs at Grangemouth and that it is an issue of major concern for the Labour government.

“Unite firmly believes the refinery’s lifespan must be extended, and that investment must be unlocked to sustain its operations until any just transition can take place in a managed and orderly way. 

“Grangemouth is the nation’s foremost industrial complex and it is absolutely pivotal to our manufacturing base and energy security. 

“It is vital that the UK and Scottish governments, along with Unite and the companies involved, get around the table to first of all extend the lifespan of the oil refinery and then to accelerate viable projects at the complex.

“There are a number of projects that can be developed, including the production of sustainable air fuel which could supply all of Scotland’s airports. This is also being supported by industry leaders.

“The stakes are high because 500 direct jobs are dependent on the oil refinery and thousands more in the supply chain. 

“Unite’s message is simple: keep Grangemouth working.”

So can all this talk actually be turned into action? 

Pethaps, if the Scottish and UK governments can put aside differences and pull together.

“The biggest risk for Grangemouth and the Scottish economy is to do nothing and think the status quo can continue,” according to Scottish Greens MSP Maggie Chapman.

"Scotland has all the resources it needs to become a clean energy superpower, from our access to wind, solar and tidal power to the unique skills and experience of workers at plants like Grangemouth. 

“All we need is the political will to turn that potential into reality.

“With the right planning, Grangemouth can stand at the forefront of the Scottish economy as a driving force for our transition to a greener, more sustainable future.

“But that planning can’t just be done with the multinationals, who have shown little interest in sustainability or the plant’s long-term future. 

“The government must coordinate with the workforce, their unions, the local community and campaign groups like Keep Grangemouth Working if we’re to build a future that works for everyone.”

Gardner said backing from government would be crucial to help rebalance a competitive disadvantage and retain home-grown manufacturing.

“Ineos is a global business – we work on a global platform,” he said. 

“Our biggest challenge is energy costs. We pay around three times the price for energy as the US, for instance.

“We are struggling to manufacture in the UK and Europe because of very high energy costs versus the rest of the world and because we’re on the path to decarbonisation.

“It’s a challenge that we are absolutely willing to take on, but with support from government.

“Ineos has decarbonised by more than a third since 2005 – that has cost money but it is decarbonising. 

“Now we need to get another third down.

“It’s the right thing to do and we should get the benefit by knowing our products are low-carbon.

“People ask what is a green job. A green job should be low-carbon manufacturing – doing what we do now but not emitting carbon to the atmosphere.

“Green jobs are our jobs. They are science, technical and engineering jobs, just with low or no carbon emissions. The trick is to do what you’re doing but don’t emit carbon.”