A Framework for Economic and Financial Analysis of Refinery Projects: The Case of Siraf Refineries Complex

Document Type : Original Article


1 Assistant Professor of Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran.

2 MA in Economics, Faculty of Economics and Political Sciences, Shahid Beheshti University, Tehran, Iran.


Oil rich countries are always faced by the question of exporting or refining the crude. Refining is classified as a low margin capital intensive industry, and it makes the question more complicated. In this research it is sought to develop an analytical framework for decision making on the same matter. A cost benefit model in which both economic and financial modelling is used is implemented on a local refinery. Findings reveal that the refinery is not financially profitable in spit of having discounts on the crude as the feed. However, extending the model to economic analysis change the results. To do that, different scenarios for the price of crude, price of the refined products, discount rate and environmental costs in addition to shadow prices and social discount rate are calculated. Results show that 44 scenarios out of 45, show profitability.


- Abdoli, G. (2009). Estimation of Social Discount Rate for Iran. Economic Research Review, 10 (3), 135-156 (In Persian).
- Anahita Oil Refining Company. (2008). Basic Engineering/Feed Contract (Pre Basic Study Report (00/EF-PR/DBS-0001) (In Persian).
- Bhattacharyya, S. (2019). Energy Economics. Springer Press.
- Booth J., Anderson G., Booth K. & Massey, K. (2012). Valuing Energy Security: Customer Damage Function Methodology and Case Studies at DoD Installations. National Renewable Energy Laboratory.
- Chaudhuri, S. & Ray, S. (2016). Social and Economic Impact Analysis of Vadinar Refinery of Essar Oil: The Case of a Mega Refinery. Indira Gandhi Institute of Development Research (IGIDR).
- Daneshmand, A., Jahangard, E. & Abdollah-Milani, M. (2018). A Time Preference Measure of the Social Discount Rate for Iran, Journal of Economic Structures, 7(29), 1-10.
- De Paoli, L., Sacco, M. & Pochettion, N. (2016). Evaluating Security of Energy Supply in the EU: Implications for Project Appraisal. EU (European Commission).
 - Esmaeilnia, A. & Azarmehr, N. (2008). The Feasibility Study of Constructing Domestic Oil Refineries as a Policy Option to Replace Gasoline Import. Journal Of Financial Economics (Financial Economics and Development), 1(4), 169-193 (In Persian).
- European Commission. (2000). Green Paper: Towards a European Strategy for the Security of Energy Supply, (No. 769).
- European Commission. (2014). Guide to Cost-Benefit Analysis of Investment Projects, Economic appraisal tool for Cohesion Policy 2014-2020.
- Ghoddusi, H. & Wirl, F. (2019). Crude or Refined? Downstream Investment for OPEC Countries. The 6th Iran Economy Conference.
- Hemmati, H. (2015), Economic Analysis of Refinery Construction in South Pars District with Condensate feed. 3th International Conference of Oil and Gas (In Persian).
- Institute for International Studies of Energy. (2019). Hydrocarbon Balance Sheet of Iran in 2017. Planning Department of Iranian Oil Ministry (In Persian).
- Kapodar, K. & Abdallah, C. (2016). Dynamic Fuel Price Pass-Through: Evidence from a New Global Retail Fuel Price Database. International Monetary Fund, (wp/16/254).
- Mian, M. (2016). Feasibility Study for Oil & Gas Projects.
- Millington, D., Mcwhinney, R. & Walden, Z. (2014). Refining Bitumen: Costs, Benefits and Analysis. Canadian Energy Research Institute. https://b2n.ir/s61865.
- Muhsin, W. & Zhang, J. (2019). Economic Assessment of a Crude Oil Hydro Treating Process. Chemical Engineering Transactions Journal, 76, 481-486 https://www.aidic.it/cet/19/76/081.pdf.
- NIODC. (2019). Statistical report on oil products. Iranian National Oil Distribution Company (In Persian).
- Rezazadeh-Mehrjoo, R & Bahadori, S.  (2016). Calculation of Discount Rate in Feasibility Study Of Iranian National Oil Company Development Projects. Planning Department of National Iranian Oil Company, (In Persian).
- Riazi, M., Agrawal, S. & Eser, S. (2013). Petroleum Refining and Natural Gas Processing. Liverpool University Press.
- Shell, Shell Strategy Day 2021. https://www.shell.com/investors/investor-presentations/2021-investor-presentations/strategy-day-2021.html
- Unido. (2005). IPPA Teaching Materials for Economic Analysis.
- World Bank. (2004). Islamic Republic of Iran; Energy-Environment Review Policy Note (No. 29062-IR;Water, Environment, Social and Rural Development Department, Middle East and North Africa Region). https://openknowledge.worldbank.org/handle/10986/14387
- www.iea.org/data-and-statistics
- Zaker, M. (2019). Techno-Economic Analysis of Using New Catalyst in Sulfur Recovery of Gas Refineries. MA Dissertation. Shahid Beheshti University (In Persian).