Refining and reforming: Unit economics
Why refiners live on a sliver of the pump price
What this tab covers What it costs to move a unit of energy this way: capital and operating costs, tariffs, utilisation and how it compares with the alternatives.Refining is a thin-margin, high-volume business: crude is about half the pump price and refining costs plus profit about a seventh. Grey hydrogen is cheap because gas is cheap; fuel is about three-quarters of its cost.
Key costs
| Measure | Value | Note |
|---|---|---|
| Refining costs and profits in US gasoline price | 14.3% of 3.10 USD/gal, about 0.44 USD/gal or 19 USD per barrel of gasoline (calculated) USD/gal (2025)7 | Crude was 51.4% of the price; 2016 to 2025 average refining share 15.0% |
| New refinery capital cost (Dangote) | about 19 billion USD for 650,000 b/d, about 29,000 USD per b/d (calculated) USD per barrel per day (total cost as reported, nominal)818 | Includes polypropylene and large hydrogen units; began producing fuels in January 2024 and was expected to reach full capacity around mid-2025 |
| Grey hydrogen (SMR, no capture) | 1.06 USD/kg (2018 USD)9 | Gas at 4.42 USD/MMBtu, 483,000 kg/day plant, 90% capacity factor; capital 713 USD per kg/day, about 340 million USD in total (calculated) |
| SMR with 96% CO2 capture | 1.64 including CO2 transport and storage USD/kg (2018 USD)9 | Autothermal reforming with capture: 1.59 |
| Coal gasification hydrogen | 2.58 (no capture); 3.09 (with capture) USD/kg (2018 USD)9 | Capital 5,243 USD per kg/day, about 7 times SMR |
| Coal-to-liquids capital (Ningxia, 4 Mt/yr) | about 55 billion yuan, roughly 90,000 to 100,000 USD per b/d (calculated, assuming about 7.6 barrels per tonne and 6.5 to 7.3 yuan per USD) USD per barrel per day13 | About three times a new oil refinery per unit of capacity |
| Refinery CO2 | 40.7 (range 13.9 to 62.1 by country) kg CO2-eq per barrel5 | 2015 global average, volume-weighted |
Where the money goes
| Item | Share or amount |
|---|---|
| SMR: natural gas | about 73% of hydrogen cost (calculated from NETL)9 |
| SMR: capital | about 13%9 |
| SMR: operations and maintenance | about 15%9 |
| Coal gasification: capital / fuel / O&M | about 45% / 17% / 37%9 |
| Refining: energy use | Fired heaters dominate: fuel is 77 to 99% of energy input to the main units6 |
Worked example (calculated): at NETL's 1.06 USD/kg, a 483,000 kg/day SMR running 90% of the year makes about 159,000 t of hydrogen a year, worth about 168 million USD, of which roughly 123 million USD (73%) is gas. At 4.42 USD/MMBtu that implies about 0.175 MMBtu of gas per kg, so each 1 USD/MMBtu rise in gas price adds about 0.18 USD/kg. This is why grey hydrogen costs track gas prices.
Sources
- Carbon intensity of global crude oil refining and mitigation potential (Jing et al.), Nature Climate Change Stanford University / Nature, 2020
- Energy Bandwidth for Petroleum Refining Processes US Department of Energy (Energetics Inc.), 2006
- Gasoline explained: Factors affecting gasoline prices US Energy Information Administration, 2026
- Dangote Refinery, Lagos (project profile, 2021; completion dates in it are out of date) NS Energy, 2021
- Comparison of Commercial, State-of-the-Art, Fossil-Based Hydrogen Production Technologies National Energy Technology Laboratory, US DOE, 2022
- Visiting the world's biggest single coal-to-liquid project in Yinchuan, China IEA Clean Coal Centre (sustainable-carbon.org), 2017
- Nigeria's long-awaited Dangote refinery starts diesel, jet fuel output S&P Global Commodity Insights, 2024