A refinery can be well designed and still lose money if its crude is expensive, its product slate misses local demand or its utilisation falls below the level needed to recover fixed costs. A feasibility test must begin with a specific configuration and crude slate, then model the cost of bringing feedstock to the site and selling each product into a real market. Nameplate capacity is not a proxy for competitive supply.
The IEA’s 2025 medium-term assessment expected substantial refinery additions and closures through 2030, with regional patterns differing sharply. That matters because mature markets with declining road-fuel consumption may be exposed to closures and import dependence, while new complex plants in growing economies may capture domestic demand and export markets. Yet a global capacity forecast cannot substitute for a site-level product balance. Competitive position depends on the plant’s conversion units, energy use, carbon intensity, labour, logistics and access to crude grades.
Crude Economics Set the Starting Position
Crude evaluation should compare API gravity, sulfur and contaminants with the refinery’s design, availability and landed cost. A discount on a heavy or sour grade has value only if the plant can process it without losing uptime or requiring additional treatment. Model product yields and quality for several crude blends, then apply market prices net of transport, storage, blending, taxes and export costs.
This also determines how much flexibility the refinery has when market conditions change. A plant dependent on one crude grade may achieve attractive economics under its base assumption but become exposed when differentials narrow or supply is disrupted. Multiple crude options can provide resilience, provided the configuration can process them without significant yield or operating penalties.
Demand Determines Whether the Product Slate Works
Refining margin is not a stable spread between a benchmark crude and a basket of products. It varies with crude slate, complexity, location, product prices and by-product credits. Forecast demand separately for gasoline, diesel, jet fuel, LPG, naphtha and other outputs, accounting for electrification, efficiency, biofuel blending and petrochemical feedstock requirements.
The supply side needs equal attention. Existing and committed capacity, announced closures, imports and seasonal inventories determine whether additional barrels can actually find a market. A refinery producing more diesel than the local market can absorb may depend on exports, exposing the project to freight costs and exchange-rate movements. Conversely, strong domestic jet-fuel demand can support a particular configuration even when overall petroleum demand growth is modest.
Utilisation Is the Commercial Pressure Point
The refinery must be tested at the utilisation level required to cover cash operating costs, service debt and meet the investor’s return threshold. That threshold depends on the plant’s fixed-cost base, energy consumption, maintenance requirements and configuration. A project that looks attractive at 90% utilisation may be materially weaker at 75%, particularly during ramp-up or periods of weak margins.
A proper refinery market feasibility study should therefore run the economics through multiple downside conditions: weaker crude differentials, lower product cracks, slower demand, delayed commissioning and temporary outages. Benchmark the project against imports, brownfield expansion and alternative supply routes rather than treating a greenfield refinery as the default answer.
Refinery Competitiveness Assessment Framework
A new refinery can be tested through four linked commercial conditions:
- Secure the Crude Advantage
Determine whether the refinery can access suitable crude at a competitive landed cost and maintain feedstock flexibility without compromising yields or uptime. - Match the Product Slate
Assess whether the configuration produces the products the target market needs and whether surplus volumes have a credible export route. - Establish the Utilisation Threshold
Calculate the minimum operating rate required to cover costs, service financing and meet the investor’s return hurdle. - Stress-Test the Margin Case
Model crude differentials, product cracks, demand, logistics, commissioning delays and outages to determine whether the project remains viable when market conditions weaken.
Nexdigm can integrate feedstock analysis, product-demand forecasting, refinery configuration, margin modelling and scenario testing to identify the conditions under which new capacity can compete. The resulting assessment can also indicate whether the project should proceed as designed, be reconfigured or be phased differently.
Nexdigm Case Study
Nexdigm evaluated a proposed 180,000-barrel-per-day refinery across three crude slates and two conversion configurations, modelling local fuel demand and export netbacks. The assessment found that the simpler configuration fell below the return hurdle at 82% utilisation under weaker cracks, while the complex option required long-term crude supply and product offtake agreements.
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Harsh Mittal
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