No sooner was the ink dry on the Scottish Government’s Green Industrial Strategy, but Petroineos confirmed the news it floated last November. It will begin winding down Grangemouth oil refinery next year.

This is hardly the flying start the government envisioned for a key component of its just-transition plan.

Ensuring the ecosystem

In their foreword to the strategy paper, economy secretary Kate Forbes and acting energy secretary Gillian Martin said ithas a single aim. That is to help Scotland “realise the economic benefits of the global transition to net zero”.

The aim is to ensure “the growth of the world’s net-zero economy translates into good, well-paid jobs across Scotland today and for future generations and stimulates exports of Scottish energy, goods and services,” they wrote.

“It means securing investment in every part of our country and ensuring that our workforce shapes and shares in the benefits of green growth. And – by boosting growth and earnings – we want to ensure that a thriving green economy also helps to power progress on the Scottish Government’s other priorities of eradicating child poverty and investing in public services.”

The foreword called for “an active state”, but one that would work with “businesses and workers” as “key drivers of growth”.

The key to all of this would be “ensuring an investment-friendly ecosystem”.

Welcome steps

And this stance received a tentative welcome from the energy sector.

Indeed, Offshore Energies UK (OEUK) CEO David Whitehouse praised the fact the document “prioritises a competitive fiscal environment and regulatory certainty”. He emphasised the industry’s position that this was “key to attracting and facilitating the investment required to deliver net zero”.

Meanwhile, Andrew McRae, policy chair at the Federation of Small Businesses Scotland, said the body had “long called for more certainty on the government’s plans in this area”.

He added that the publication of the strategy is “a welcome step towards giving small businesses the confidence they need to take key operational decisions”.

Much detail on the government’s Green Industrial Strategy delivery will be in its delayed Energy Strategy and Just Transition Plan. This has been anticipated for much of the year.

Its contents are unknown. Until recently, the Scottish government made no secret of the fact it does not support further North Sea drilling. Perhaps most notable, the SNP has supported windfall taxes.

In other words, it has shown itself to be at odds with the creation of an “investment-friendly ecosystem”.

Sound of inevitability

When Petroineos announced its Grangemouth changes, it framed it as an inevitable step. CEO Franck Demay said demand for the fuels it refines is decreasing. As such it makes more sense to turn the site into an import terminal for foreign fuels instead.

The Scottish Trade Union Congress (STUC) said the workers had been “despicably failed by politicians and governments”. They had been “utterly inadequate in persuading Petroineos to expand the lifespan of the refinery”.

Scottish Conservatives energy spokesman Douglas Lumsden spoke for many when he said the Scottish government’s “hostile attitude” towards oil and gas, including supporting a presumption against new drilling licences and backing Labour’s tough fiscal environment, was partly to blame.

Martin roundly refuted the claim during a Scottish Parliament Q&A session this week.

Following a ministerial statement, Lumsden asked if the government would “accept responsibility that it is their narrative and their presumption against oil and gas that has got us to where we are now” on Grangemouth.

Martin did not agree. “I do not accept that at all,” she said.

Gillian Martin MSP — *Gillian Martin, Acting Cabinet Secretary for Net Zero and Energy*

A little warmth

It’s notable that on the same day Petroineos announced its closure – the same day that the Scottish and UK governments presented a united front to the workers facing job losses – Scottish secretary Ian Murray signalled the Labour government might be softening its stance on windfall taxes and investment allowances.

As things stand, the government is due to extend the Energy Profits Levy (EPL), in November. At that point, the headline rate will rise from 75% to 78%. It will also run to 2030 rather than 2029.

Industry has turned increasingly downbeat on the EPL’s impact. Wood Mackenzie said the tax increase would leave North Sea companies fatally wounded.

The government plans to remove what it has termed the “unjustifiably generous investment allowances” that apply to energy company profits. The Budget, at the end of October, should set out more details.

But, when pressed on the issue at CBI Scotland’s annual dinner, Murray told the organisation’s chief strategy officer Tracy Black that Treasury officials are consulting with businesses. Chancellor Rachel Reeves will provide “clarity” on the matter in due course, he said.

“For our members, for a large number of business out there, it’s about that reassurance that our energy supply is going to be secure, it’s going to be affordable for the next 20 to 30 years as we transition, and there’s a worry that there could be unintended consequences [like a] lack of investment into existing infrastructure, the ability for the sector to attract talent in lots of key skills [and the] reliance on gas imports.”

Black asked whether “a balance can be found from the government and for the industry affected or is it going to stay quite as strong and rigid? At the moment, it feels quite difficult.”

Aim for stability

Murray stressed that “everyone knows that the people who are currently drilling for oil and gas are absolutely going to be the ones that are delivering the renewable energy as well”. Those “skills are in the industry and it’s the same companies that are going to be investing in it”.

“Everyone gets that the tax regime is under discussion in terms of what it wants to look like, but the goals are the sameand the chancellor’s been pretty clear about that,” he said.

“That clarity of what the chancellor wants to do and achieve, and that stability, has got to be right at the heart of everything we do in business. There has been a recognition that this is difficult, and there is discussion ongoing, and we’ll find out on October 30 at the Budget.”

In the Green Industrial Strategy document, Forbes and Martin said Scotland would “seize the opportunity” presented by the energy transition. The plan is to create “highly skilled, well-paid jobs with economic and social value” for oil and gas workers.

Martin and UK energy secretary Michael Shanks committed to helping Grangemouth’s workers find new jobs.

The former said the “highly skilled, highly experienced workforce … could be transitioned into making biofuels, into making hydrogen and, of course, running the import terminal”.

The latter, meanwhile, said it is vital to “make sure that those workers have got a future”. The closure lets both governments implement their just-transition plans – and to be judged on them.

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