Scotland's only oil refinery could cease operations as soon as 2025 under plans announced by owners Petroineos.
The company said Grangemouth had been facing significant challenges because of global market pressures.
But the announcement comes a month after Andrew Gardner, the chairman of Petroineos, warned that Labour’s plans for the North Sea put Grangemouth at risk.
Mr Gardner told The Telegraph that Sir Keir Starmer’s promise to ban new oil and gas projects in the North Sea risked leaving Grangemouth without enough fuel to refine.
He said: “We want to keep jobs and manufacturing here but Labour hasn’t understood that we need supplies. I need natural gas, ready, cheap and available as a feedstock.”
In an email to staff on Wednesday, Petroineos said it would “soon be unable to compete effectively with bigger, more modern and efficient refineries in the Middle East, Asia and Africa”.
It added: “The energy transition is also well underway and demand for road fuels we produce has started to decline and is expected to reduce steadily over the coming years.”
The firm said a new terminal would be able to import petrol, diesel, aviation fuel and kerosene into Scotland.
Wider implications
Grangemouth is the only fuel refinery in Scotland and one of only six remaining in the UK. It supplies 80% of Scotland’s fuel and has been a vital piece of national infrastructure for the past century.
Not only that, it accounts for 4% of Scottish GDP and 8pc of the country’s manufacturing base.
It also supplies raw materials to the adjacent petrochemical and plastics plant run by Ineos Olefins and Polymers (Ineos O&P) whose raw plastics and polymers go into UK products ranging from construction materials to clothing.
Grangemouth is fed by the Forties Pipeline network, which links it to 80 of the UK’s offshore oil and gas fields. Most of those fields are in decline but would normally be replaced by new wells. However, Labour - which is ahead in the polls - plans to ban new drilling if it wins power.
Reaction
Alex Salmond has blamed political “hostility” towards the energy industry for the closure of the refinery.
Mr Salmond was first minister in 2013, when the refinery last looked set to close, following a bitter row between owner Jim Ratcliffe and the trade unions.
The ex-SNP leader criticised the “lack of urgency” from the Scottish Government and Scotland’s politicians.
“There is a cost to the hostility of Labour, SNP and the Greens to any hydrocarbon production in the North Sea and one price is the closure of Scotland’s most significant industrial plant and the loss of thousands of highly paid jobs directly and through the supply chain,” the Alba leader said.
Sharon Graham, general secretary of trade union Unite, said: “This proposal clearly raises concerns for the livelihoods of our members but also poses major questions over energy supply and security going forward.”
Derek Thomson, Unite Scottish secretary, said: “Unite continues to engage with Petroineos, and we urge other stakeholders such as the Scottish and UK governments to do the same due to the implications that this proposal will have for the economies of the devolved and reserved administrations. Every option must be on the table in order to secure the hundreds of highly skilled jobs based at the Grangemouth complex for the long-term.”
Shadow Energy Secretary Ed Miliband called the news “deeply worrying” and said: “Labour is determined to ensure that the skills and expertise of Britain’s oil and gas workers will drive Britain’s clean energy future.
“A Labour Government will offer £1bn of public investment into the decarbonisation of the UK’s major industrial hubs, including Grangemouth.”
Talks
Claire Coutinho, the UK energy secretary, is to meet with Petroineos within the next few days to discuss the refinery’s fate.
A Department for Energy Security and Net Zero spokesman said the Government was “seeking assurances from Grangemouth on how they are supporting employees and the long-term future of the site”.
They added: “We remain confident in our fuel supply.”
Neil Gray, the Scottish work and energy secretary, said the closure of Grangemouth was “a commercial decision”, adding: “The Scottish Government is committed to working with industry to secure a sustainable future for Grangemouth that reflects our ambitions for decarbonisation and a just transition for Scotland’s industrial sector whilst recognising the important role it plays in meeting fuel demand Scotland.”