Editorial comment
When it rains, it pours. Just ask fans of Manchester United – the most successful club in the history of English football. Their team has been struggling on the pitch for over a decade, ever since legendary manager, Sir Alex Ferguson, retired in May 2013. This season has been particularly painful for supporters. Aside from a string of poor results, the club has also been beset by a series of off-field issues. Even the club’s famous stadium, Old Trafford, has a leaky roof that is prone to soaking already-disgruntled fans on rainy match days. The consensus is that the club has been neglected by its current owners. Hope is, however, on the horizon: Sir Jim Ratcliffe, the English billionaire founder and Chairman of INEOS Group, is reportedly close to buying a 25% minority stake in the football club for approximately £1.25 billion. Fans will be hoping that the acquisition will signal the start of a new era for the club, with significant investment in its ageing infrastructure and playing staff to follow.
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INEOS Group’s impending investment in this British institution has, however, been overshadowed by another of its recent business decisions on UK shores. Petroineos, a joint venture between Ratcliffe’s INEOS Group and China’s state-owned PetroChina, has confirmed that it is preparing to shut down Scotland’s Grangemouth refinery and convert it into a fuels import terminal, putting hundreds of jobs at risk. Petroineos has not yet put a timescale on the transition, but said that it expects the work to take around 18 months to complete, so the 99-year-old refinery is expected to continue operating until spring 2025.
Franck Demay, CEO at Petroineos Refining, said: "As the energy transition gathers pace, this is a necessary step in adapting our business to reflect the decline in demand for the type of fuels we produce [...] This is the start of a journey to transform our operation from one that manufactures fuel products, into a business that imports finished fuel products for onward distribution to customers."
The future of Grangemouth has been in question for some time, due to its age, and highlights the dilemma that refineries face in light of the low carbon future. At the recent European Refining Technology Conference (ERTC) in Lake Maggiore, Italy, Graeme McMillan, Partner & Associate Director at Boston Consulting Group (BCG), described the energy transition as a “tectonic shift” for the sector. In his presentation, McMillan explained that "doing nothing" is not an option for European refineries. However, he noted that refiners still have several levers to pull. If they intend to maintain operations in the long-term, they can look to take advantage of higher margins and increase their competitive position through initiatives such as utilising advances in digitalisation, developing wider crude slates and responding faster to market changes. Refiners can also look to develop decarbonisation plans to minimise exposure to carbon taxes. Another option is transformation – either partially or fully – to new green businesses, leveraging existing assets where advantageous. Alternatively, refineries can operate to capture shrinking margins until the end of their lifecycle, or convert to storage facilities.
Perhaps Manchester United serves as the perfect metaphor for the European refining sector during these times. To stand still is to fall behind.
