* Refinery and plant employ 1,400 staff

* UK government urges dialogue

(Adds government statement, background)

By Simon Falush and Sarah Young

LONDON, Oct 23 (Reuters) - Ineos said on Wednesday it would close its petrochemical plant in Grangemouth, and the future of Scotland's only refinery remained under threat as the company said it would reopen the facility only if the threat of strike action was removed.

The 210,000-barrels-per-day refinery, shut last week due to a dispute, provides most of the fuel for Scotland. It and the petrochemical plant in total employ around 1,400 staff.

Grangemouth could be the latest in a line of refinery casualties, including Coryton in Britain - victims of competition from Asia and the Middle East, and falling demand for gasoline in Europe. ID:nL6N0I717N

British Prime Minister David Cameron wants the Swiss owners of the chemicals plant and refinery to continue talks with workers to try to resolve the dispute, his spokesman said.

Ed Davey, Britain's energy minister, said: "We stand ready to help with discussions between the management and the union to ensure this can happen."

Ineos said in a statement that it "will now decide on whether to restart the refinery".

"This will be primarily dependent on the removal of the threat of further industrial action," the company said.

The company said liquidators would be appointed within a week for the petrochemical plant.

Grangemouth accounts for around 8 percent of Scotland's manufacturing industry, according to calculations by David Bell, a professor of economics at Stirling University.

He said the shutdown of the petrochemicals plant would be the "heaviest blow" for Scotland since the disappearance of a number of electronics companies collectively known as Silicon Glen in the 1990s and early 2000s.

"I guess there'll now be a kind of race on between the Scottish and UK governments to see who can present the best political case in relation to rescue or partial rescue."

The refinery has been shut due to an industrial dispute centring on terms and conditions including pension entitlement.

The refinery moved closer to permanent closure on Monday after a clear majority of union workers rejected a plan that would have cut pensions and benefits. ID:nL5N0IB33R

PetroChina 601857.SS owns half of the refinery, which Ineos INEOS.UL operates. Ineos owns completely the attached petrochemical plant.

Grangemouth also powers BP's BP.L Kinneil terminal, which processes North Sea crude coming ashore via the Forties Pipeline System, a grade that helps set the benchmark for global oil prices.

(Reporting by Simon Falush; Editing by Dale Hudson)

((simon.falush@thomsonreuters.com)(+442075427681)(Reuters Messaging: simon.falush.reuters.com@reuters.net))

Keywords: GRANGEMOUTH SCOTLAND/CLOSURE