Grangemouth Oil Refinery: Energy Security
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The Minister for Energy Security and Net Zero (Graham Stuart)
May I begin by thanking the hon. Member for East Lothian (Kenny MacAskill) for securing this important debate and colleagues across the Chamber for joining it? I recognise that news of a plan to transition Grangemouth refinery into an import terminal is undoubtedly a matter of concern for many people. However, I make clear that the Government are committed to ensuring continued fuel supply, protecting jobs and creating opportunities in Scotland and across the UK. The primary responsibility of my Department is for the energy security of the whole of the UK, including Scotland. On 29 November, I met the Scottish Cabinet Secretary, Neil Gray, and we agreed that both our Governments would continue to work closely on this issue through forums such as the Grangemouth future industries board. Scotland and the UK will continue to have reliable supplies of fuels after the transition, in line with the UK Government’s commitment to energy security and resilience.
Before I go into specifics, I want to recognise that Grangemouth refinery has been an important asset for the fuel supply of Scotland and the local economy since it opened in 1924. No final decision on the future of the refinery has been made, but the planning for the conversion of the refinery into an import terminal is a commercial decision by its owner, Petroineos. That reflects its view of the economic sustainability of the refinery in the context of expected refining margins, domestic demand projections and international competition. Even in this macroeconomic context, the UK and Scottish Governments are working together to understand all the options for the future of the refinery.
Christine Jardine (Edinburgh West) (LD)
As the Minister just said, Grangemouth is a vital economic factor for the immediate vicinity, for my constituents in Edinburgh West and indeed for all of Scotland. Will the Government continue to support Grangemouth, given its importance to the future success of the green freeport, of which it is a vital component, not least because of its future capability to produce the sustainable aviation fuel on which so many developments are predisposed?
Graham Stuart
The hon. Lady is absolutely right to champion such opportunities, of which there are so many going forward. That is why, if a decision is made on refining there, I believe that would be countermanded multiple times over by the opportunities in issues such as SAF, which she mentioned. Scotland and that area have such a role to play in delivering and continuing the UK’s global leadership in cutting emissions. We recently celebrated the fact that we have halved emissions—we are the first major economy on earth to have done so—and of course going forward we are ambitious than any other major economy on earth. Scotland has such a vital role to play in that.
David Duguid (Banff and Buchan) (Con)
My right hon. Friend makes an excellent point about the importance of the jobs at Grangemouth and the skills that have been developed over the years—this year, it is 100 years since it first came on stream. Does he agree with me and most of the oil and gas industry, which is adamant that the skills, technologies and supply chains that supply not just the Grangemouth refinery but the whole North sea offshore industry are vital for managing not just the energy security of today but the energy transition of tomorrow?
Graham Stuart
My hon. Friend is a great champion of those workers in the oil and gas industry. We now have an integrated energy industry. He may have seen the recent research suggesting that 90% of those currently employed in oil and gas have transferrable skills to the green transition, in which we can positively expect to see many more jobs in future if we maintain the strength of that industry today. That is why it is so disappointing that some Opposition parties oppose new licensing of oil and gas when that is vital to maintaining those jobs and that capability. In that respect, the Alba party is more constructive than others sitting on the Opposition Benches.
We are working closely with both the company and the Scottish Government to ensure a managed transition of the site, support its workers and ensure that Scotland’s fuel supply remains resilient. Petroineos’s plans will ensure that the Grangemouth site can maintain Scotland’s fuel supply through imports. Adapting the infrastructure to accommodate imports in larger tankers, particularly of diesel at Finnart on the west coast of Scotland, will ensure that the import terminal has greater flexibility and maintain robust fuel security.
I recognise that consumers may be worried that increasing the UK’s reliance on imported fuel products could increase the price they pay at the pump. I want to provide reassurance that this conversion is unlikely to drive up the price of petrol and diesel for the Scottish consumer. Fuel prices are mainly driven by international petroleum product markets and exchange rates, and imports into other sites such as Clydebank are already competitive in the Scottish market.
I also want to acknowledge that the announcement of the conversion will be concerning to the refinery’s employees and their families. We remain in close contact with the Scottish Government to mitigate impacts on jobs and the local economy. As part of our commitment to levelling up, the UK Government are already supporting the Falkirk Council area through the UK shared prosperity fund. Its allocation of more than £6.1 million will deliver a range of interventions that support local businesses, communities, people and skills. We are also supporting Falkirk Council with £40 million of UK Government investment through the Falkirk city and regional growth deal, which is supporting a range of locally driven projects that will create high-value jobs to help boost the local economy. We are working with the Scottish Government to deliver the Forth Green freeport, which covers the area. The freeport aims to drive a transition to net zero by 2045 by attracting up to £6 billion-worth of investment and creating approximately 50,000 jobs, generating an estimated £4.2 billion in gross value added in the first five years.
Douglas Chapman (Dunfermline and West Fife) (SNP)
The Minister is giving a comprehensive reply. The Forth Green freeport is really important. He mentions that he has been in discussion with the Scottish Government and others in the Grangemouth area. Will he also make a direct plea to the freeport to make sure it is fully involved in any potential reinvestment in the facility at Grangemouth, which has been part of the industrial heritage and the industrial scene in Scotland for a very long time? It would be a very valuable contribution if the Government could make such an intervention.
Graham Stuart
As the hon. Gentleman will be aware, through contracts for difference and many other policy announcements from the UK Government, we are driving enormous growth in jobs in the green sectors. We expect them to grow to 480,000 jobs by the end of this decade. As I say, as a global leader in decarbonisation, Scotland, and that area in particular, has an enormous amount to offer and there are huge opportunities coming forward. We will publish next year a green jobs plan, working with industry to identify the pressure points and the opportunities going forward.
The Government remain absolutely committed to supporting the North sea oil and gas sector. The conversion of the refinery into an import terminal is not expected to impact significantly on North sea production. That is because only a very small amount of oil refined at Grangemouth currently comes from the North sea. Indeed, since the start of 2022, Grangemouth has received on average less than 10% of its supply from the North sea via the Forties pipeline, which the hon. Member for East Lothian referred to. This North sea crude would be made available to the open market via the terminal at Hound Point, alongside the rest of the Forties blend production. I can also confirm that there will be no impact on gas supplies.
I assure the House that the Government will continue to back North sea production by granting licences for new projects, such as the Rosebank field development. Developments such as Rosebank will continue to strengthen our energy security, support the transition to net zero, and create new jobs and opportunities. Rosebank, for example, is expected to be significantly less emissions-intensive than previous developments, which will help the UK to reach its ambitious targets for net zero. Its operator, Equinor, estimates that it will produce oil at around 12 kg of carbon dioxide per barrel, compared with an offshore production average of more than 20 kg of carbon dioxide per barrel. So it is already a much more efficient production. If electrification were to go ahead, it would be significantly lower again. In addition, the Rosebank project will provide investment of £6.3 billion in UK-based businesses, support around 400 UK-based jobs, and add around £24 billion to the UK economy across the project’s lifetime, according to its operator. Yet that licence finds itself opposed by the Labour party, even if it supports jobs and helps us to green the basin.
I want to finish by reiterating to the House the Government’s commitment to backing the North sea oil and gas sector to protect our energy security, attract investment, and create opportunities for communities in Scotland and across the UK. It is a declining basin. It is expected to fall, with new licences, at 7% a year. New licences are not part of increasing production, because we will not have increased production. It is about managing the decline and doing so in a way that brings forward developments such as Rosebank with lower emissions than the alternative. That is why it is the right thing to do for the environment, however counterintuitive that might seem. It is also the right thing to do for jobs and for the maintenance of the capability for the long term as we go through the transition and the green economy grows in the freeport as well as elsewhere.
The UK Government will continue to work closely with the Scottish Government on this issue to ensure that when the time comes, there is a just transition of Grangemouth into an import terminal—if that is the decision made—and to ensure that fuel supplies for Scotland and the UK are maintained. The Government will also continue to support economic development in the local area to ensure that there is a just transition for the workforce.
I look forward to continuing to engage with Members, and with the hon. Member for East Lothian in particular, on this vitally important issue.
Question put and agreed to.