Complexity is a quantitative measure of how much high-value conversion capacity a refinery has installed relative to its distillation capacity. A complex refinery is one with a large number of high-value conversion units. A low complexity refinery has fewer and less value-adding units.
The complexity number for a refinery is an attempt to summarize a refinery’s configuration in a single measure. This is done by assigning a complexity factor to each type of process unit, and then weight averaging these values based on each units capacity relative to the size of distillation capacity at the refinery.
The complexity values assigned to each type of process unit range from 1 to 20. They are meant to roughly reflect the relative capital cost of the different units, but are also assumed to correlate with relative operating costs and margin contribution.
There are a number of different complexity number calculations employing basically the same methodology. The most widely known in the industry is the Nelson complexity number.
The complexity number has a number of important uses:
- Comparing refinery configurations – The complexity number provides a useful single measure for comparing multiple refineries with different configurations. A refinery with a higher complexity number can be assumed (all else being equal) to have higher yields of light products per barrel of crude processed, higher margins, a higher asset value, and a higher construction cost.
- Normalizing cost measures – Operating costs are generally thought to correlate with complexity. So the complexity number provides a useful normalization factor when benchmarking refinery cost performance.
- Normalizing asset value –A refinery’s market value (when bought or sold) is generally thought to correlate with complexity number, since complexity correlates roughly with both costs and margins. So the complexity number provides a useful normalization factor when comparing refinery transaction values.