- [Relevant document: Fourth Report of the Scottish Affairs Committee, The future of Scotland’s oil and gas industry, HC 459.]
- 3:00 pm
- I beg to move,That this House has considered the future of the oil refining sector.It is a pleasure to see you in the Chair, Mr Western. I am pleased that this debate has attracted considerable support, particularly from north of the border, and that today The Times had a timely editorial on this issue.My constituency is in northern Lincolnshire on the south bank of the Humber, which has been christened “the UK’s Energy Estuary”. In recent years, the Humber has become a world-leader in the offshore and renewable energy sector—something we are proud of locally. However, while the Humber is full of opportunity for offshore and renewable energy and will play a significant role in the UK’s net zero efforts, we must not overlook the UK’s carbon energy needs as we make the transition to cleaner energy sources. We must face the fact that a significant portion of our total energy consumption still comes from oil, gas and coal and will continue to do so. The UK’s annual total primary energy consumption is around 130 million to 140 million tonnes of oil equivalent; fossil fuels made up roughly 79% to 81% of that in the year 2022-23.The Humber has played a significant role in ensuring that that demand is met. Until the crisis at Lindsey oil refinery in my constituency earlier this year, the Humber could boast of producing a third of the UK’s refined fuel, with two of the UK’s six major oil refineries based in the Humber region. Now, as we approach the end of 2025, only four operational refineries remain in the UK, following this year’s closure of Grangemouth, with significant job losses, and the uncertainty at the aforementioned Lindsey refinery where over 400 people are employed. Even more striking is the fact that the number of refineries is down from 18 in the 1970s.Sadly for the oil refining sector, most people do not even realise that it exists or appreciate its importance, yet the sector is a vital part of the UK’s energy security. A number of our crucial sectors rely on it, including the transport industry and defence sectors. All Members will know that oil refineries produce products that are essential for our critical energy needs, such as petrol, diesel, jet fuel and fuel oil. The Lindsey refinery has a capacity equivalent to around 35% of British petrol consumption and 10% of British diesel, and also supplies aviation fuel to Heathrow via pipeline.Yet the House of Commons Library states:“Refinery output in 2024 was 48 million tonnes. This was 55% below the 1973 peak.”Output in 2024“was around 14% below levels from the late 2010s and more than 40% below output from the start of the century.”That is worrying considering that refineries supply 47% of the UK’s final energy demand, as 100% of aviation, 97% of road and 61% of rail transport still relies on liquid fuels. The refineries also support 100,000-plus jobs across the UK, with 4,000 directly in the refineries. We collect £37 billion annually in tax—that is duty and VAT—from them, and they deliver low-carbon fuels that have an impact equivalent to removing 3 million cars from the road each year. That is not to mention the fact that ours are among the lowest-carbon refineries globally—in fact, 80% of the UK’s top import partners have a higher carbon intensity—yet despite their importance we have seen the closure at Grangemouth and the uncertainty at Lindsey.What does the future hold? UK oil refineries continue to face a number of challenges. Of course demand for refined products will decrease as the country continues to reduce its emissions in accordance with the legally binding commitment to achieve net zero emissions by 2050, though that target may change. Moreover, energy is the single largest cost of operating a refinery. The industry faces high energy costs, and carbon costs negatively impact the competitiveness of UK refineries. UK refineries are essentially competing with one hand tied behind their back while their competitors pay little or nothing in carbon costs. That is on top of the issue of unequal access to decarbonisation opportunities.Our route to lower emissions must not come at the price of deindustrialisation or at the expense of our energy security. As an editorial in The Times today points out, some in the Government are so hostile to fossil fuels and so beholden to the green ideology that they are willing to sacrifice our future income and tolerate the jobs that are being lost. We must put the national interest first. Moreover, our climate targets are still some way off, so in the meantime we must continue to rely on the products that refineries produce.The sector remains vital for today’s economy, yet our refineries are closing. We must realise that closing UK refineries does not reduce demand; it merely shifts production abroad. That, of course, often leads to higher emissions. We are thereby exporting jobs outside the UK while failing in our efforts to cut emissions. Losing further capacity would therefore leave the UK increasingly dependent on imports and the unpredictability of global politics, relying on other nations that often have weak rules on environmental protection, labour rights and safety.Moreover, once a refinery closes, it does not return. The skills, infrastructure and investment are lost permanently. We must also consider the impact on the local economy and local people that closures cause. At Lindsey, over 400 people are directly employed on the site, and well over 1,000 rely on it through the supply chain. As North Lincolnshire council said in its position statement on Lindsey oil, the implications of any closure of the site will have far-reaching consequences for the local economy and the people employed directly and indirectly.The council has stated that the potential closure of the refinery will have a significant impact on local market confidence, particularly following the turmoil at British Steel earlier this year. As such, failure to properly support the businesses impacted could multiply exponentially the impact of the closure. Moreover, the south Humber bank, where the site is located, relies on the interconnectivity of its industrial supply chains. As such, the refinery is not an isolated operator but an integral node in a wider network that supplies products to downstream users, and disruption at one site can quickly ripple across the regional economy.These integrated clusters work in tandem, reflecting the modern industrial model, and our economic resilience relies on the system being maintained, thereby ensuring long-term industrial sustainability in the UK. I note the Scottish Affairs Committee’s conclusions on the handling of Grangemouth, which can be found in the Committee’s recently published report on Scotland’s oil and gas industries. I am sure the Chair of the Committee, the hon. Member for Glasgow West (Patricia Ferguson), will delve more deeply into the detail of the report, though let me quickly say now that the report stated that both the UK and Scottish Governments should have acted sooner to prepare for the crisis in Falkirk.
- I hear the hon. Member on the strategic importance of oil refineries; we have seen it in Grangemouth for over 100 years. Back in February 2024, in response to a question from the former Member for East Lothian, the right hon. Member for Richmond and Northallerton (Rishi Sunak), the then Prime Minister, described the closure of Grangemouth refinery as “obviously a commercial decision”. Does the hon. Member for Brigg and Immingham (Martin Vickers) agree with that characterisation by the former Prime Minister, who was at the time his party’s leader, given that he is describing—and I agree with him—the strategic role that oil refineries play in his community?
- The hon. Member makes an important point: it is the case that such decisions are not solely commercial; the Government must consider, more widely, energy security and the impact on the economy.In preparation for this debate, I received representations from various interested parties that are dependent on the oil refining sector. They have outlined their concerns, some of which I have mentioned already, and the solutions they would like to see put forward. One issue that has been mentioned to me is the expansion of the scope of the carbon border adjustment mechanism to include oil refineries’ products. As Members may know, the CBAM is a tax levied on goods at the border based on their carbon content. Expanding the CBAM to products from oil refineries based overseas, as the Government proposed in their autumn Budget, would enable domestic oil refineries to remain competitive and stop them fighting with one arm tied behind their back.I mentioned that the refining sector is subject to ever-increasing regulatory burdens and carbon pricing. Sadly, the impact of net zero politics, particularly the UK emissions trading scheme, is driving rapid and sustained deindustrialisation of the British economy. Refining receives substantially lower free allowances under the scheme compared with other industries, such as steel and cement, and ETS costs are one of the highest expenditures in a refinery’s operating budget. Competitors in other regions do not face those costs, which seriously damages the competitiveness of UK refineries. We must realise that the ETS damages our energy security and should be urgently repealed. Longer-term solutions may include bringing refined products fully into the UK CBAM or ensuring that the UK retains control over refineries in any future UK-EU carbon market linkage agreement. If we do not want to let this issue get any more out of control, we must act now.Before concluding, I refer back to the situation at Lindsey oil, because the company is in administration. We have a situation in which FTI Consulting, acting on behalf of the official receiver, is engaged in discussions with potential buyers and investors. Those talks are rightly confidential, and when questioned, Ministers have repeatedly said that they are awaiting the recommendations from FTI. That inevitably feeds speculation through the grapevine that angers employees and their union representatives. I have held meetings with two consortia that are interested in buying the whole site and continuing operations, and the leader of North Lincolnshire council has held discussions with a third. Do the Government support a deal that would retain the refinery complete? Until now there has been no answer. I again ask the Minister: do the Government favour that option and, if necessary, would they provide some support?
- Several hon. Members rose—
- Order. I see that seven Members are looking to speak. Let us start with six-minute speeches and see how we progress.
- 3:14 pm
- It is a pleasure to serve under your chairmanship, Mr Western. I thank the hon. Member for Brigg and Immingham (Martin Vickers) for securing this important debate. I speak in my capacity as a member of the Scottish Affairs Committee, which has recently published a report, “The future of Scotland’s oil and gas industry”, as part of our inquiry into Scotland’s role in the UK’s energy transition. I thank the hon. Member for allowing the report to be tagged to this debate on the Order Paper.The closure of the Grangemouth oil refinery, following the Petroineos announcement in November 2023 that refining operations would cease at the site, was a key focus of our report. The Grangemouth oil refinery operated for over a century, and was Scotland’s only oil refinery before refining officially ended in April this year. The refinery’s closure has left some 400 employees and the wider Grangemouth community facing deep uncertainty. The Prime Minister’s pledge of £200 million through the National Wealth Fund for future industries at the site was welcome, as was the Scottish Government’s announcement of £25 million to help establish a just transition for Grangemouth. The extra £14.5 million announced in the Budget was another welcome boost. However, the Government have not yet set out how that will be delivered and how it will tangibly result in jobs.The Committee visited the Grangemouth site during our inquiry. We heard oral evidence from Petroineos, the company that owns the refinery, from its parent company Ineos, from union representatives, from Project Willow and from the Forth Valley college, which provides the skills support for former refinery workers. Our report concluded that both Governments should have acted sooner to set in motion plans for the site’s future and to prepare for resulting job losses. That lack of action created an employment gap and hardship to the local community that could have been avoided.
- 3:18 pm
- I thank my hon. Friend and constituency neighbour the Member for Brigg and Immingham (Martin Vickers) for securing this timely debate about Lindsey oil refinery, which employed many of my constituents. The closure is a disaster for our Greater Lincolnshire area. It is, I believe, a direct result of green policies that are no longer logical.I am no climate change sceptic. I am prepared to have investment in green energy—we are world leaders in offshore wind in the Humber, are we not? We are doing our bit, but the Government are taking it to new heights. All ideologues are dangerous, but fanatical ideologues are the most dangerous of all, and that is what we have in our Secretary of State. We have these ludicrous targets; I commend the editorial in The Times today calling it “targetitis”. Originally, Theresa May arbitrarily set a limit of 2040. Where did that come from? Boris Johnson, in his bumptious, casual way, not considering the evidence, unilaterally cut it down to 2030. Where did that come from? All this is massively damaging.I would not mind if we were actually making a difference to global warming, but we are responsible for only 1% of global emissions. According to some estimates, our total global emissions are less than China’s annual accrual. We are making absolutely no difference! China holds us in contempt. It is doing to us what we did to it in the 19th century. China is totally ruthless.
- Will the right hon. Member give way?
- I give way to the hon. Gentleman, who is the son of a very distinguished councillor in my constituency.
- It is a pleasure to contribute to this debate. Together, the 100 smallest carbon-emitting countries represent more carbon emissions than China on its own, so if all those smaller-emitting countries make their own contribution it can make a bigger contribution to cuts than China. Does the right hon. Member not agree that those small measures add up to a huge difference globally?
- That may be a fair point. I said at the beginning of my speech that I am not a climate change sceptic. Everybody is prepared to do their bit.I have already mentioned wind farms, but what about solar energy? In Lincolnshire we are prepared to have solar energy on our farmland, but in my constituency 16,000 acres of the most productive land in the entire country—enough land to feed the city of Hull every single year—is put under solar farms, with panels manufactured in China, destroying our ability to feed ourselves. There has to be a balance, but at the moment we do not have one. We are importing so much from our dear friends in Norway that they are opening 250 exploration wells.This debate, secured by my hon. Friend the Member for Brigg and Immingham, is extremely timely. The closure of Lindsey oil refinery is a complete disaster. It employs many of our constituents and is vital for the whole of our industrial infrastructure. We need strong domestic refining capacity. The Secretary of State goes on about energy security all the time, but that would strengthen energy security at a time when we are already importing two thirds of our gas and increasing volumes of refined fuels.I would not mind these green policies, but we are not actually contributing to tackling global warming; we are simply exporting carbon emissions to other countries. It is complete madness. If we were sensible about this, and if it were possible to get some sort of global recognition of the problem, maybe we could start to tackle it. Relying on foreign refiners means exporting jobs and value overseas while leaving Britain more exposed to global price shocks and geopolitical risks. Expansion of the UK refining sector protects thousands of highly skilled, well-paid jobs. It also supports an entire region and supply chain in engineering, fabrication, logistics and maintenance. Those are precisely the jobs that sustain industrial communities and create apprenticeships for young people.
- 3:24 pm
- It is a pleasure to see you in the Chair today, Mr Western. I thank the hon. Member for Brigg and Immingham (Martin Vickers) for securing this highly important debate, and I draw everyone’s attention to my membership of Unite the union.Since coming to this place, I have repeatedly raised the issue of the Grangemouth oil refinery closing, with 435 jobs lost on site and 2,822 lost in the wider supply chain. Closure means an end to a century of oil refining on the site and to a generational employer for Grangemouth people. Nearly every family in the town has had someone, or knows someone, who worked at the site. There is no doubt about it: local businesses will feel the pain of the closure. The hairdressers, barbers, small independent retailers, hotels, restaurants, pubs and garages are the very businesses that make up the heartbeat of the local community and the town’s economy. They are all negatively impacted.The closure is more than just a local constituency issue. It is Scotland’s biggest industrial issue in four decades, it is safe to say, since the end of the coalmining industry. To put the matter into the national context, the Grangemouth refinery was worth more than £400 million per annum to the Scottish economy, according to both Scottish Enterprise and PwC. While conflict rages on in Europe, British people have been susceptible to the resulting price shocks and disrupted supply chains that have impacted the oil industry in Europe. At this perilous time, with refining ending at Grangemouth, Scotland is now in the ridiculous position of importing our own oil. The energy-abundant nation of Scotland is reliant on global logistics and outside influences for our oil products. It is incredible that we have lost our self-sufficiency.Why has this happened? Why did the refinery close? I will say something different from what right hon. and hon. Members have mentioned so far. Let me be clear: the idea that the Grangemouth refinery closed as part of trying to achieve net zero, or as part of some woke green agenda or an environmental campaign, is utter nonsense. The real reason—the heart of the matter—is Petroineos. It is made up of private capital, Sir Jim Ratcliffe’s Ineos and a foreign Government in the form of Chinese state-backed PetroChina. It controlled the Grangemouth refinery, a key piece of Scottish and British national infrastructure, and closure was a commercial decision.
- 3:31 pm
- It is a pleasure to serve under your chairmanship, Mr Western. I commend the hon. Member for Brigg and Immingham (Martin Vickers) for securing this important debate. I also acknowledge the contribution of the hon. Member for Alloa and Grangemouth (Brian Leishman), who spoke with his usual passion, but today I believe with a degree of anger as well, and rightly so.A just transition supports and protects existing oil and gas sector workers through—I emphasise “through”—the transition to a world-class renewables workforce, a transition in which Scotland is well placed to lead the world. I want to share the following quote:“‘just transition’ has now become meaningless for so many people and that’s a failure… People should feel like that’s not something done to them, but something they’re part of shaping.”That was said by the Minister for Energy in a recent interview with the Holyrood magazine. Sadly, for thousands of workers in North sea upstream, midstream and—in the case of refining—downstream jobs, a just transition is far removed from the reality that they face.The workers now made redundant are angry at the UK Government’s failure to support their transition. Their families and communities are also angry, as are we, their representatives. We know that the just transition is doomed to fail because of three things: first, the failure to press forward with renewable energy schemes in north-east Scotland at the urgent pace that is required; secondly, the failure to allow new exploration licences while persisting with the crippling energy profits levy on the oil and gas sector; and thirdly, the failure to protect refinery jobs at Grangemouth and Mossmorran. Today I learned that 7,000 business leaders, workers and companies have signed a letter to the Prime Minister in which they demand change to the EPL to avoid the projected 1,000 job losses per month.