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New lease of life for Grangemouth

Hydrocarbon Engineering,

GlobalData has said that the Grangemouth refinery is losing the last link to its previous life, as major deal was struck between national labour union Unite, the Scottish government and Petroineos, the plant’s operator’s, allowing the 210 000 bpd plant to reopen. This outcome is favourable to all and didn't seem like a done deal on 23rd October when the Scottish government actively sought a buyer for the refinery and petrochemical plant to take over from its Swiss owners and their Petrochina partner.

The deal and the backstory

Jeffrey Kerr, GlobalData’s Managing Analyst covering Downstream Oil & Gas said, ‘the union and it membership had authorised a general strike a few weeks ago as Ineos, which owns 100% of the petrochemical plant and 50.1% of the refinery, took steps to mothball the plant and reduce refinery operations. Citing high operating expenses due to fuel and feedstock costs, Ineos was seeking cost reductions from its workforce or else threatening to shut the whole works down altogether.

‘The Scottish government needed the refinery to open again as it prepares for next year’s referendum on leaving the UK. The current deal therefore provides a solution to restarting the facility and keeping the entire complex open for at least three years, allowing the referendum to proceed without significant job reduction.’

The future

Ineos and Petrochina are now looking to build a LNG regasification plant at the facility, which will be able to accept shipments of relatively inexpensive natural gas from the US. Kerr commented, ‘ the Grangemouth refinery has experienced a disadvantage fue to its reliance on North sea produced natural gas and residual fuel oil for its power, both of which are relatively expensive. Furthermore, its primary feedstock is Forties crude oil. Long considered a major benefit for Grangemouth, the direct line into the Forties platform is proving to be more of a hindrance of late, since the crude oil itself has become part of the world’s international pricing benchmark.’

BP is going to soon be inaugurating a new steam pipeline connected to a neighbouring Fortnum owned power plant, which will provide steam and power to operate the company’s Kinnell oil storage terminal and Forties processing and treatment plant. Kerr concluded, ‘BP owned the Grangemouth refinery up until 2006, and its central selling point was its proximity to the Forties system. Now, this last link is being severed as the refinery gets a whole new labour contract and lease of life.’

Adapted from a press release by Claira Lloyd.

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