Introduction

A benchmark refinery margin is a standardised measure of the profitability of refining crude oil into finished petroleum products, typically calculated using a hypothetical refinery configuration and a fixed slate of crude oil and product yields. It serves as a representative indicator of the economic performance of the refining sector, independent of specific company operations. Benchmark margins are crucial for tracking industry trends, comparing regional refining economics, and evaluating the impact of changes in crude oil prices, product demand, or regulatory policies. They are widely used by analysts, investors, and industry participants to assess market conditions, guide investment decisions, and support strategic planning.

Kpler Regional Refining Margins are a gross (hydrocarbon) margin indicator calculated based on several criteria, including geographical location, crude oil, and refinery complexity profile.

where;
a, b, c are regions and,
Gross Product Worth (GPW) is the weighted value of refined products included in our margin calculation. It is computed by multiplying the price of each product by its percentage share in the total yield.

Our methodology classifies refineries into four primary configurations:
Simple: A refinery with a topping or Hydroskimming setup, primarily performing distillation (atmospheric, sometimes vacuum).
Hydrocracking (HCK): Hydrocracking units along with visbreaker and other secondary units (Gasoline / Hydrotreating block), upgrading heavier fractions like vacuum gas oil into higher-value products such as gasoline, diesel, and jet fuel.
Fluid Catalytic Cracking (FCC): Systems with Fluidized Catalytic Cracking (FCC) units, visbreaker, and other secondary units. These facilities convert heavier fractions like vacuum gas oil into gasoline, diesel, and jet fuel.
Coker (Full conversion): Setups with a Delayed Coker Unit, FCC unit, and hydrocracking units, which allow it to upgrade heavier fractions (e.g., vacuum gas oil and residue) into lighter, more valuable products like gasoline, diesel, and jet fuel.

Table 1: Refinery configuration matrix

	Simple refinery	Hydrocracker refinery	FCC refinery	Coker refinery
crude distillation unit	x	x	x	x
vacuum distillation unit		x	x	x
Naphtha hydrotreater	x	x	x	x
Isomerization	x	x	x	x
Catalytic reforming unit	x	x	x	x
Kero, HDT	x	x	x	x
Diesel, HDT	x	x	x	x
FCC			x	x
Hydrocracker		x		x
Vis-breaking unit		x	x
Coker unit				x

The margin indicator is segmented into four key refining regions:

Singapore
Northwestern Europe (NWE)
Mediterranean
U.S. Gulf Coast (USGC)

A refinery may produce many different products, but our methodology takes into account only the main products, including liquified petroleum gas (LPG), naphtha, gasoline, jet, fuel oil, propylene, and petroleum coke.

The calculation gives the average margin for a hypothetical refinery as the methodology does not focus on recreating the exact refining margin of a designated refinery. Therefore, it should be borne in mind that circumstances peculiar to a region or a refinery may divert from Kpler’s average margin indicator. For instance, a strong refining margin in the NWE region (for a coastal refinery) does not mean that a landlocked refinery in Germany has a weaker margin by default or should enjoy the same profitability. Variations in logistics, crude sourcing, local market conditions, and technical hiccups can all impact individual refinery margins.

Process and methodology

Standardized assays are drawn from an in-house library of global crudes and meticulously created using a crude assay manager. Using these crude assays, regional yield projections are modeled based on refinery configurations through advanced simulation programs.
Refinery yields are calculated via linear programming where the crude, refinery configuration and product prices are taken as inputs. When calculations are made on a per-barrel basis, the product yield might exceed 100% as processing gains are expected, especially in more complex refinery setups. This is explained by greater volumes occupied by smaller molecules and additional volumetric gains from more feedstock in various secondary units. When calculating on a mass basis, the sum of yields should not exceed 100%.
In the second phase, product prices sourced from Argus Media are gathered. These product prices help to carry out economic optimization to determine yield switch tailored to specific refinery setups. Once the switching process is optimized through programmatic analysis, net refinery yields are finalized.
Crude costs can refer to a specific and symbolic crude for a given refinery set-up in a region, i.e., Basrah Medium for Mediterranean Coker Refinery or Mars for USGC Coker Refinery. Alternatively, they can reflect the cost implications of processing multiple crude blends at varying proportions, effectively modeling a crude basket approach.
Freight costs are derived from Argus Media, factoring in key shipping routes to ensure accurate cost assessments.
Secondary operating costs namely, fuel, power, chemicals, carbon and maintenance, are not included in our refinery margin calculation. On average, these costs typically range between $3-6/bbl, depending on the refinery configuration.

Table 2: Average yield range by refinery profile

		YIELD RANGE
Product/Configuration	Simple	Hydrocracker	FCC	Coker
Gas (including LPG)	5 - 10%	5 - 10%	5 - 15%	5 - 15%
Gasoline	20 - 30%	30 - 40%	40 - 50%	30 - 40%
Jet/Kero	10 - 15%	10 - 20%	10 - 20%	10 - 20%
Gasoil	15 - 20%	15 - 25%	15 - 25%	30 - 40%
HSFO	30 - 40%	5 - 10%	10 - 15%
Petcoke				3 - 20%