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The closure of Scotland’s only oil refinery next year has accelerated efforts in Holyrood and Westminster to plot a pathway for a green future at the sprawling industrial complex at Grangemouth.
Petroineos’ decision to turn the site into a fuel-import terminal, first trailed in November, will lead to a net loss of 400 jobs — a move the union Unite has called “industrial vandalism”.
The crisis forms Labour’s most serious test in Scotland, where the party won dozens of Westminster seats at the general election in July.
After his victory, Sir Keir Starmer, prime minister, pledged to make saving threatened jobs at Grangemouth his number one priority in Scotland.
Ed Miliband, the UK’s energy security and net zero secretary, is working closely with his Scottish counterpart, Gillian Martin, to prevent the country’s largest industrial site withering into wasteland.
Close collaboration between London and Edinburgh will be critical to fund nascent technologies, set pricing mechanisms and reshape supply chains to switch from fossil fuels to low-carbon alternatives.
Since July a government-funded task force called “Project Willow” has been exploring options for the development of green industries at Grangemouth to replace the UK’s oldest refinery, building on studies carried out by Petroineos for years. The group, advised by consultancy EY, is scheduled to report back next year.
As the two governments scramble to secure an industrial future for Grangemouth beyond the import terminal plans, they have shortlisted three “credible options” identified in Project Willow: low-carbon hydrogen, synthetic “e-fuels” and sustainable aviation fuels. Other processes will also be considered and any investible propositions could be funded by the National Wealth Fund, a new initiative launched by chancellor Rachel Reeves.
The complex regulatory reform and lengthy construction timeframes mean that any initiatives would be years in the making — a far stretch from the “shovel-ready” plans sought by the unions.
“We wish the previous government had started this work five years ago, but we have to start from here,” said a UK government official.
Unite in particular has raised fears that the shift away from fossil fuels will replace well-paid jobs with fewer, lower-paid roles, failing to meet the “just transition” promised in the pursuit of net zero ambitions.
“We are the first cab off the rank for testing what the ‘just transition’ means,” said one executive involved in Project Willow.
The study, according to documents seen by the Financial Times, has explored how hydrogen produced by natural gas or renewables could power biofuel refineries and be extracted into synthetic “e-fuels” to replace petrol.
RWE has early-stage plans for a green hydrogen facility at Grangemouth by 2029. Ineos also has plans for a gas-powered “blue” hydrogen plant that would pump carbon dioxide into rock formations under the North Sea through the Acorn carbon capture storage project on the north-east coast.
Acorn, promoted by the Scottish government, is awaiting UK government approval to move towards commerciality.
Bioprocessing plants for e-fuels and sustainable aviation fuel, powered by green hydrogen, are other options that have been previously considered by Petroineos but will require government intervention to become commercially viable at scale.
The Scottish government would need to help foster new supply chains for gathering feedstocks for processing into low-carbon transport and aviation fuels. Used cooking oils, fish farm waste or sugar beet crops could be processed into fossil-free diesel and ethanol.
“We need government to unlock economic and technical barriers as biorefining doesn’t yet work commercially at scale,” the executive said. “Procuring the right feedstock and product pricing is where these projects rise and fall.”
Edinburgh Airport, which sources jet fuel from Grangemouth, has already been working with Petroineos on the potential for SAF production, as aviation faces a UK mandate for lower-carbon fuel to account for 10 per cent of jet supply by 2030, rising to 75 per cent by 2050. “We think there is a real opportunity for Scotland to corner this market,” the airport said.
Forging an SAF production market in Scotland is “complex”, it added, but many partner airlines want more European capacity as it is mostly produced in China and the US.
“The beauty of Project Willow is that it’s a blank canvas,” the executive said. “The terror is that it’s a blank canvas.”