Material Insights · Understanding the Material World

Hydrogen and Refining and reforming

Refineries are among the largest hydrogen users, needing it to remove sulphur from fuels and upgrade heavy oil; they make some in their reformers and the rest from gas, and they are now the first big buyers of green hydrogen.

Hydrogen (chemical) and Refining and reforming (energy): 4 relationships.

How they are linked

1. Desulphurisation and upgrading

Physical flow · Strong · Hydrogen into refineries

Refineries use hydrogen to strip sulphur from diesel and other fuels and to upgrade heavy oil, so tighter fuel standards raise their hydrogen needs.

  • more than half refining share of US hydrogen use of about 14 Mt a year
  • 60% rise in US refinery hydrogen use, 2008 to 2014

In the US, over 90% of hydrogen goes to refining, ammonia and methanol. Refinery use rose 60% in six years as refiners cut the sulphur content of diesel.

Sources: US Energy Information Administration; Clean Air Task Force

2. Made inside the refinery

Joint production · Strong · Reformers make some; SMRs and suppliers make the rest

Catalytic reformers that turn naphtha into petrol blendstock release hydrogen as a by-product, and refineries run steam methane reformers or buy from gas suppliers to cover the rest.

  • 135% rise in merchant hydrogen supplied to US refineries, 2008 to 2014

By-product hydrogen from reforming meets only a fraction of refinery needs, so refineries depend on gas-fed reformers. In the US, merchant supply from industrial gas companies grew more than twice as fast as total refinery use between 2008 and 2014.

Sources: US Energy Information Administration

3. Price link: main use

Cost and price · Weak · Little visible link

Most refinery hydrogen is made on site or supplied under long contracts, so it has no traded price that follows refining margins.

  • -0.15 monthly change correlation
  • -0.03 12-month change correlation
  • -0.02 fitted elasticity

The refining index shows almost no link, slightly negative month to month. What ties them is cost: hydrogen is an operating cost for refiners, driven by gas prices rather than by fuel prices.

Sources: Material Insights (World Bank, FRED, IMF data)

4. First market for low-emissions hydrogen

Transition · Rising · Refineries swap grey hydrogen for green or blue

Refineries already use large, steady volumes of hydrogen on site, so replacing grey with low-emissions hydrogen needs no new end-use equipment.

  • more than 2 Mtpa low-emissions hydrogen for refineries and industry by 2030 from committed projects
  • 10,000 t a year green hydrogen for IOCL Panipat, 25-year contract at Rs 397/kg

Refining and chemicals lead adoption of low-emissions hydrogen, although it was still under 1% of demand in 2024. IOCL aims to shift half of its hydrogen to green sources by 2030, while its Panipat expansion from 15 to 25 Mt a year of crude alone adds about 84,000 t a year of hydrogen need.

Sources: IEA; JMK Research

For investors

Key learnings

  1. Refining is one of the largest hydrogen users, more than half of US demand, driven by sulphur limits on fuels.
  2. Refinery hydrogen is mostly made on site or under contract from gas, so it shows no traded price link to refining margins.
  3. Refineries are the first large market for green hydrogen, but at about $4.6 per kg in India in 2025 they pay roughly twice the $2.1 cost of grey hydrogen.

What to track

  • Fuel sulphur standards and diesel demand: Tighter standards and more diesel raise hydrogen needs (As revised · fuel regulators)
  • Refinery green hydrogen tenders: Price and volume show how fast refiners decarbonise hydrogen (Per tender · IOCL, BPCL, HPCL, SECI)
  • Natural gas prices for refiners: The main cost of grey refinery hydrogen (Monthly · PPAC, Henry Hub)

For policymakers

Key learnings

  1. Indian refiners are the National Green Hydrogen Mission's first large buyers, as IOCL's Panipat award shows.
  2. Refinery expansion raises hydrogen need, about 84,000 t a year at Panipat, so capacity growth can outpace green supply.
  3. Mandates or contracts for refinery green hydrogen set its premium over gas-based supply, which falls on refiners or consumers.

What to track

  • Green hydrogen share of refinery hydrogen use: Progress against IOCL's 50% by 2030 aim (Annually · company reports)
  • Refinery capacity additions: Raise hydrogen demand (Annually · PPAC, Ministry of Petroleum and Natural Gas)

India

IOCL awarded India's first refinery green hydrogen contract in 2025, 10,000 t a year for Panipat at Rs 397 per kg over 25 years, and aims to make half its hydrogen green by 2030.

Sources

  1. Hydrogen for refineries is increasingly provided by industrial suppliers, US Energy Information Administration (2016)
  2. U.S. Hydrogen Demand Assessment, Clean Air Task Force (2025)
  3. Global Hydrogen Review 2025: Demand, IEA (2025)
  4. IOCL concludes India's first green H2 end-user offtake auction at US$4.6 per kg, JMK Research (2025)
  5. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)