Since the details of how a refinery operates are difficult to comprehend without specialized industry knowledge, the Nelson Complexity Index provides an easy metric for quantifying and ranking the complexity and sophistication of different refineries.
Refineries that are higher on the Nelson Complexity Index are valued higher relative to their peers because of their ability to handle lower quality crude oil or produce more value-added products.
Due to their greater complexity, high NCI refineries are more costly to build and operate.
The NCI is measured on a scale from 1 to 20, where low numbers represent refineries that are simple in nature and produce low-quality fuel, such as jet fuel and heating oil, and high numbers represent more complex and expensive refineries that produce high-quality light fuels, such as gasoline and kerosene.
The NCI compares the costs of various upgrading units to the cost of a pure crude distillation unit.
Computation of the index is an attempt to quantify the relative cost of a refinery based on the added cost of various upgrading units and the relative upgrading capacity.
Refineries in North America, specifically in the U.S. Gulf Coast region, have higher NCI ranges.
Boasting a median NCI of 9.79, the Gulf Coast region is the most complex refining center in the world.
Europe is 2nd with a median NCI of 7.87, followed by Asia with a 7.47 NCI.
Key Takeaways
- NCI takes account of what types of petroleum products an oil refinery can produce
- Measured on a scale from 1 to 20, the higher the value on the NCI, the more sophisticated and complex products the refinery can produce
- Higher-valued refineries on the NCI tend to be more costly to build and operate, but also produce more profitable outputs
