BUSINESS ANALYSIS

THE DECISION by Ineos to close its petrochemicals plant at Grangemouth is hugely significant.

The site has two ethylene crackers which can produce a million tonnes of ethylene — the raw material used in the manufacture of everything from cling film to pipes — a year.

However, much of the focus following yesterday’s bombshell announcement was not on the fate of the petrochemicals plant but the neighbouring refinery business.

To be clear, the refinery is Grangemouth’s key strategic asset. It is the only facility of its type in Scotland and produces around 80% of all road fuels sold at petrol pumps here, and also supplies the north of England and Northern Ireland.

As the single processing point for crude oil and gas pumped along the BP-owned Forties pipeline, the refinery is vital to the health of the North Sea oil and gas industry.

The system services more than 50 individual North Sea oil platforms and has capacity to carry more than one million barrels of oil per day.

The Grangemouth refinery processes around 200,000 barrels in a 24-hour period, producing more than nine million litres of clean fuel every day. Other Forties production is exported via tanker from the Forth.

The potential loss of Grangemouth capacity has left politicans sweating.

Motoring body AA yesterday warned fuel prices could increase considerably if Grangemouth was to go offline — and experience of other refinery outages suggested an 8p to 10p per litre rise. Following a two- day strike at Grangemouth in 2008, the price of crude increased to record levels.

But it must be stressed that there is no threat to fuel supplies at this time. The Grangemouth refinery is operational and producing enough fuel to ensure stock levels are maintained.

If the worst case scenario did come to pass and Ineos and PetroChina — the other major shareholder in the refinery business — closed the facility, it would not mean fuel pumps running dry. The UK Petroleum Industry Association said capacity within the UK’s six other refineries would keep Scotland moving, and the infrastructure to bring fuel north already exists.

But there would be extra costs, meaning price pain for consumers filling up.

The closure of the petrochemicals plant is a tragedy for the 800 workers who have lost their livelihoods.

It is extremely important that Ineos now clarifies the future of the refinery. It is an asset Scotland simply cannot afford to lose.