A prospective buyer has emerged for the Grangemouth oil refinery, according to an MSP, after the owner said operations will cease next year with the loss of 400 jobs.

Petroineos, the joint venture that owns the facility, confirmed plans first outlined last November, saying the site’s switch to becoming an import terminal will safeguard Scotland’s supply of fuels but will require significantly fewer workers.

Confirming the end of oil refining today, the company said a formal consultation process will begin that will leave just 75 employees on site over the next two years.

The announcement came as local SNP MSP Michelle Thomson said she has been contracted by a “serious” prospective buyer who would maintain the site as an oil refinery.

The member for Falkirk East said she had signed a non-disclosure agreement with the undisclosed party who would be looking to purchase the site with their own resources, rather than requiring government support.

Speaking to the media, she said: “The only thing I’m prepared to say at the moment, and that I’ve got permission to say, is that I believe, having looked at it, that it is a serious proposition.

“We shall see, but being quite clear, there’s some way to travel. These things are very complex. There’s lots of moving parts in terms of business plan and funding and so on.

“We’ll see what happens, but I am saying this because I’m duty-bound to do everything I can for my constituents, and that is the basis on which I’m going to proceed.”

The Scottish and UK Governments responded to Petroineos’s statement by announcing a £100 million package of support which includes £20m of new money top of £80 million in joint funding from the two governments for the Falkirk and Grangemouth Growth Deal.

A statement from the Scottish Government said this funding “will support the community and its workers, investing in local energy projects to create new opportunities for growth in the region.

“Over the next 30 years, it is estimated that the Falkirk & Grangemouth Growth Deal will deliver over £628 million in economic benefits, with an employment impact of 1660 net jobs across the Falkirk Council area.”

The announcement comes just 24 hours after the Scottish Government published its Green Industrial Strategy and acting Net Zero and Energy Secretary Gillian Martin said the government wanted the refinery to continue “as long as possible”.

She spoke about talks involving the Holyrood and Westminster governments, together with Petroineos concerning options for the future of the refinery site, but gave no indication of today’s announcement.

Today she said: “We are working very closely with the UK Government and together we have communicated our disappointment to Petroineos today.”

Ed Miliband, the UK Energy Secretary, said his deparment “stands ready to engage on how the National Wealth Fund could back projects that have the potential to yield a viable long-term future for the site.”

In its statement, Petroineos stressed that INEOS O&P UK and INEOS FPS (Forties Pipeline System) will continue delivering services and products to its customers and are largely unaffected by this change.

“We wish to assure our customers, suppliers and other stakeholders that it is “business as usual” for the INEOS businesses at Grangemouth,” it said.

“INEOS Grangemouth remains committed to a long term successful future for the site which includes the commitment to deliver net zero by 2045.”

Scottish Green MSP Gillian Mackay, who grew up only 200 yards from the refinery, said: “We can’t allow local workers or their families to be left behind at the whim of a billionaire. If Jim Radcliffe had any concern for the wellbeing of the community, he would be in Grangemouth today looking the workers directly in the eye.”

Grangemouth is the UK’s oldest refinery and currently faces significant challenges due to global market pressures and the energy transition. Refining is a globally competitive industry and Grangemouth is increasingly unable to compete with bigger, more modern and efficient sites in the Middle East, Asia and Africa. 

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.

Petroineos is a joint venture between INEOS and PetroChina and those shareholders have invested more than $1.2bn since 2011 to maintain the refinery’s safe operation, recording losses in excess of $775m during the same period.

Frank Demay, chief executive 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.” 

While preparing the refinery site for the transition to an import terminal, Petroineos is working with the UK and Scottish governments to analyse options for Grangemouth to become a low-carbon fuels manufacturing hub.

An initial feasibility study, known as ‘Project Willow’, is assessing various low-carbon opportunities from technical, economic, commercial, regulatory, environment, community and skills perspectives.

Project Willow, funded equally by the Scottish Government and UK Government, is being managed by global consultancy firm EY, with technical, engineering and commercial support provided by Petroineos, INEOS and PetroChina.

The initial research phase is complete, with shortlisted options for development including, but not limited to, Sustainable Aviation Fuel (SAF), low-carbon hydrogen and related products, and eFuels. The project team has entered the second phase of research, comprising a detailed assessment of the viability of each shortlisted option.

By Spring 2025, the project aims to have identified commercially viable opportunities to develop low-carbon fuels that would underpin government commitments to net zero transition, maximise local employment, and contribute to long-term sustainable energy and fuel security in Scotland and the UK.

Comment: Scotland finds it’s not easy being green