Petroineos says UK refinery bids 'not credible' as 2025 shutdown looms

Petroineos has rebuffed claims that a last-minute offer for its Grangemouth refinery in Scotland could have saved the site from closure, saying a second takeover bid from a little-known buyer from North America was "not viable" to salvage the 100-year old plant.

Petroineos -- a joint venture between state-owned PetroChina and the UK's INEOS -- confirmed in September that it would convert Scotland's only oil refinery into an import terminal after May 2025, sparking outrage among lobby groups and 400 employees who are facing layoffs.

At the time, the company refuted claims that it had been approached with a "serious offer" by a North American businessman to take on the site after Scottish Parliament minister Michelle Thompson said she had been approached with a takeover plan. In November, a second takeover bid by a US-led consortium has also not progressed to due-diligence phase, Petroineos has said.

"We have not received any credible or viable bids for the refinery," a spokesperson for Petroineos told S&P Global Commodity Insights Nov. 18, stressing the capital-intensive nature of operating the aging site.

Nearly $1.2 billion in investments in the refinery were insufficient to prevent losses of $775 billion since 2011, according to Petroineos, which expects to lose another $190 million operating the plant through 2024.

Nonetheless, a spokesperson for Aberdeen's Stacey Oil Services, an offshore oil infrastructure company and asset manager, said the company is in preliminary talks with PetroChina on behalf of privately owned Hudson Reid Holdings after failing to engage Petroineos on acquisition plans.

Neither Hudson Reid Holdings nor PetroChina was immediately available for comment.

Hudson Reid Holdings, managed by Canadian businessman Garth Reid, was the first of the two companies to pursue ownership of the refinery, and would plan to keep the site operating, the source said. He dismissed allegations that the takeover bid was not credible, alleging that Petroineos had not requested proof of creditworthiness.

The company's website, which is down for maintenance, says that Hudson Reed Holdings has operated in Newfoundland for more than 150 years and specializes in oil and gas production, fuel trading, commercial fishing and other sectors. Local government records show that it was first listed on the Newfoundland registry in February 2020.

Future prospects

As the May 2025 timeline for the refinery conversion fast approaches, meanwhile, Petroineos has faced growing pressure to repurpose the refinery to meet the country's changing energy needs.

The UK and Scottish governments have provided GBP1.5 million in joint funding for a feasibility study at the site, which early next year will deliver a verdict on various prospects for the site, including low-carbon hydrogen, e-fuels, and sustainable aviation fuel production.

Trade union Unite, which represents the refinery's employees, has also produced a plan on how the refinery can "easily" be converted into a sustainable aviation fuel facility, with future prospects for transformation into a "full biofuels outlet" it said Nov. 18.

The union has blasted "a lack of evidence from the company about the need to close the refinery" and stressed concerns around ceding clean fuels production to offshore producers.

Despite government mandates to support biofuels demand, the UK has faced challenges in attracting investment in new biofuels production assets as margins have slumped and producers have eyed rival production hubs with cheap renewables access.

In an October interview with Commodity Insights, EET Fuels, another UK refiner, expressed doubts over the profitability of waste-based sustainable aviation fuel production at its Stanlow site, having dropped plans to develop a biofuels plant with the recently bankrupted Fulcrum bioenergy.

Instead, the company is aiming to import supplies from Gujarat, India, where its parent company, Essar, is better positioned to scale hydrogen-based biofuel at competitive costs.

UK legislation has sought to incentivize scalable biofuel production by imposing caps on production using waste oils, or "HEFA" production, which is currently the main commercially available technology to producers, which Petroineos had previously outlined as a "roadblock" to producing biofuel at Grangemouth.

HEFA will be capped at a 71% contribution to SAF demand in 2030 and 35% by 2040, allowing some 1 million mt/year of SAF to be supplied from HEFA starting in 2035, the government has said.