Crude oil refining versus plastic recycling: a comparative study

To compare plastic recycling and crude oil refining financially, we focus on net present value (NPV) and internal rate of return (IRR).

Plastic recycling prioritises the economic and environmental advantages of converting waste into new products. Recycling saves money by using less raw materials and reducing landfill costs, potentially increasing net present value due to lower production expenses. For example, the mechanical recycling of HDPE yields significant environmental and economic advantages by reducing the need for virgin plastic. Specifically, for every ton of recycled HDPE, there is a net saving of approximately 1600 kg CO2 emissions, which reflects improved overall sustainability measures and could positively influence NPV through potential carbon credits or reduced taxation on emissions.

Enhanced mechanical properties of recycled plastics, according to various studies, increases market appeal and the IRR of recycling initiatives. Studies show that recycling adhering to Material Value Conservation (MVC) principles, enhances economies of scale for recycled materials and increases recycling operation profits.

Conversely, oil refining offers significant economic benefits, reflected in high NPV and IRR due to worldwide fuel and petrochemical demand. Crude oil refining’s financial viability is ensured by the consistent global demand for petroleum products and the resulting stable cash flow. The crude oil market often exhibits favourable price trajectories, offering competitive returns on investment through maintained production capacity.

In contrast to plastic recycling, concerns about oil refining are rising due to environmental consequences such as greenhouse gas emissions and dwindling resources. Regulatory pressures and environmental liabilities influence crude oil refining profitability, potentially impacting NPV and IRR negatively. The move towards sustainability could jeopardise crude oil’s long-term financial prospects, making recycling technologies seem more appealing.

Although plastic recycling’s short-term economic returns are currently lower than oil refining, its long-term value and profitability could increase with technological advancements and growing demand for sustainability. Growing environmental policies and consumer interest in recycled materials are making plastic recycling more appealing than oil refining, particularly as the global economy shifts towards a circular model.

Although crude oil refining shows strong NPV and IRR because of current market conditions, the economic potential of plastic recycling is also very important given developing technologies. Market trends and consumer choices will decide which of these two industries performs better financially.

To compare chemical plastic recycling (pyrolysis) and crude oil refining, we must analyse the economics, risks, and market conditions of both NPV and IRR.

The following is a structured comparison:

	Chemical Recycling (Pyrolysis)	Crude Oil Refining
Capital Expenditure (CapEx)	High (due to specialised reactors, gas cleaning systems)	Very High (refineries are capital-intensive)
Operating Costs (OpEx)	Moderate-High (energy-intensive, feedstock variability)	Moderate (economies of scale)
Feedstock Cost	Low (waste plastic may have negative cost or subsidies)	High (linked to crude oil prices)
Product Revenue	Depends on oil/chemical prices (output similar to crude derivatives)	Stable (fuels, petrochemicals)
Government Subsidies	Often available (waste management incentives, carbon credits)	Limited (may face carbon taxes)
Market Demand	Emerging (driven by ESG policies, circular economy)	Mature (but volatile due to energy transition)
Technology Risk	High (scaling issues, contamination risks)	Low (mature technology)
Regulatory Risk	Favourable (plastic waste regulations tightening)	Unfavourable (climate policies, decarbonisation)

Side-by-side look at projected NPV and IRR

Chemical Recycling

• NPV: Highly variable
• Positive NPV cases: When subsidies, high oil prices, or premium recycled product pricing apply.
• Negative NPV cases: Without incentives or with low oil prices.
• IRR: Typically, 10–20% (can be higher with policy support, but risky).

Crude Oil Refining

• NPV: Generally positive but volatile
• Depends on crude prices, crack spreads, and refining margins.
• IRR: Usually 8–15% (lower due to high CapEx, but more predictable).

Pyrolysis recycling offers a potentially higher IRR thanks to subsidies and premium green product pricing, although it carries greater technological and feedstock risks.

Crude oil refining offers lower IRR but more consistent cash flow (barring an oil price collapse).

Over time, pyrolysis may become more attractive due to regulatory changes such as plastic taxes and carbon pricing.

Pyrolysis NPV increases with size and supportive policies, unlike refining, wherein NPV depends on unstable energy markets.

Pyrolysis recycling presents a high-IRR opportunity for high-risk, high-reward investors, contingent upon favourable policy developments.

While traditional refining offers stable returns now, it faces a long-term decline risk.

Three scenarios will help us understand this better

1. Base Case (Current Market Conditions)
• Oil price: $75/bbl
• Moderate subsidies for recycling
• Stable demand for fuels & recycled plastics
2. High Oil Price + Strong Policy Support
• Oil price: $100/bbl
• High subsidies/tax credits for recycling
• Carbon tax on refining
3. Low Oil Price + Weak Policy Support
• Oil price: $50/bbl
• No subsidies for recycling
• Low penalties for virgin plastic/oil use

Estimated NPV & IRR Across Scenarios

Scenario	Chemical Recycling (Pyrolysis)	Crude Oil Refining
Base Case ($75/bbl, Moderate Policy)	NPV: $10–30M (for 50kT plant) IRR: 12–18%	NPV: $50–200M (for small refinery) IRR: 10–14%
High Oil Price + Strong Policy ($100/bbl)	NPV: $50–100M IRR: 20–30% (with subsidies)	NPV: $80–250M IRR: 12–16% (carbon tax drag)
Low Oil Price + Weak Policy ($50/bbl)	NPV: -$20M to $5M IRR: 5–10% (struggles to break even)	NPV: $20–100M IRR: 8–12% (lower mar

Core Observations

1. Pyrolysis Wins in High-Oil/High-Policy Scenarios
• At $100+/bbl oil + subsidies, recycling can achieve IRR >20%, outperforming refining.
• Example: EU’s carbon taxes & plastic levies could push pyrolysis NPV up.
2. Refining is More Resilient in Low-Oil-Price Scenarios
• Even at $50/bbl, refineries profit due to economies of scale and existing infrastructure.
• Pyrolysis often fails to break even without subsidies.
3. Policy Risk Dominates Pyrolysis Economics
• Without incentives, pyrolysis is high-risk (low IRR, negative NPV).
• Refining is less policy-dependent but faces long-term decline risks

Evaluating Sensitivity

• For Pyrolysis:
• +$10/bbl oil price → +15% IRR (output fuels track crude).
• +$50/ton subsidy → +5–10% IRR.
• For Refining:
• +$10/bbl crack spread → +3–5% IRR.
• -$10/bbl oil price → -2–4% IRR.

In Summary

Short-Term (Next 5 Years): Refining’s NPV is higher because of its scale, but pyrolysis achieves a better IRR taking supportive policies into account.

Post-2030, pyrolysis will become dominant due to:

Regulations for plastic waste becoming more stringent (such as the UN’s Global Plastics Treaty).

Refineries facing penalties due to carbon pricing.

Feedstock Economics and Regional Policy Impacts

Cost Breakdown: Pyrolysis vs. Refining

Chemical Recycling (Pyrolysis) Feedstock

• Source: Mixed plastic waste (MPW), often sourced from:
• Municipal waste (cost: -$50 to $100/ton [subsidised tipping fees])
• Industrial scrap (cost: $0–$50/ton)
• Challenges:
• Contamination increases preprocessing costs (+$20–$50/ton).
• Low-density plastics (e.g., LDPE) yield more oil but are harder to collect.

Crude Oil Refining Feedstock

• Source: Light sweet crude (e.g., Brent) vs. heavy sour (e.g., WCS)
• Cost: $50–$100/bbl (highly volatile).
• Challenges:
• Heavy crude requires costly upgrading (+$5–$15/bbl).
• Sulphur content impacts compliance costs

Feedstock Cost Impact on IRR

Scenario	Pyrolysis Feedstock Cost	Refining Feedstock Cost	IRR Impact
Low-cost waste plastic (-$50/ton)	$0/ton after subsidies	$75/bbl crude	Pyrolysis IRR +5–10%
High crude prices ($100/bbl)	$50/ton (unsorted MPW)	$100/bbl crude	Refining IRR -3–5%
Strict contamination rules	+$50/ton sorting cost	N/A	Pyrolysis IRR -

Key Takeaway:
Pyrolysis only outperforms refining in feedstock costs when waste plastic receives substantial subsidies. Pyrolysis becomes cost-effective when crude oil prices exceed $90 per barrel.

Regional Policy Impact (NPV/IRR Variations)

A. European Union (Favourable for Pyrolysis)

• Policies:
• Plastic tax (€800/ton on non-recycled waste).
• Carbon price (€80+/ton CO₂) penalises refineries.
• Result:
• Pyrolysis NPV +40% higher than global average.
• Refining IRR dropped by 4–6% due to compliance costs.

B. United States (Mixed Support)

• Policies:
• Inflation Reduction Act (IRA) subsidies for recycling ($50–150/ton).
• Low carbon pricing (refining remains profitable).
• Result:
• Pyrolysis IRR 12–25% (varies by state).
• Refining IRR 10–18% (crack spreads drive profits).

Southeast Asia (Favourable for Refining)

• Policies:
• Minimal plastic regulations.
• Cheap crude imports (e.g., discounted Russian oil).
• Result:
• Pyrolysis NPV negative (no subsidies, low product premiums).
• Refining IRR 15–20% (low-cost feedstock).

Regional IRR Comparison

Region	Pyrolysis IRR	Refining IRR	Winner
EU	18–30%	8–12%	Pyrolysis
US	12–25%	10–18%	Toss-up
SE Asia	5–10%	15–20%	Refining

Pyrolysis profitability: A breakeven analysis

Pyrolysis viability is achieved when:

1. Oil prices > $80/bbl (boosts output fuel value).
2. Plastic waste costs < $0/ton (landfill bans/subsidies).
3. Carbon price > $50/ton (penalises refineries).

Example:

• In the EU (€80/ton CO₂ price + €800 plastic tax), pyrolysis hits IRR >25% even at $70/bbl oil.
• In Texas (no carbon tax, $50/ton plastic), pyrolysis needs $90/bbl oil to compete.

Final Recommendations

Chemical recycling (pyrolysis) vs. crude oil refining in the United Kingdom

Geared towards Investors:

Support pyrolysis in Europe and North America (policy upside).

Refining should be prioritised in Asia/Middle East because of low feedstock costs.

To all Project Developers:

Integrate pyrolysis and waste management contracts to guarantee negative-cost feedstock.

Reduce capital expenditure by 20-30% through infrastructure sharing achieved by co-locating near refineries.

Comparing chemical recycling (pyrolysis) and crude oil refining in the UK.

The UK (England), with its high landfill costs and supportive chemical recycling policies, presents a promising market for pyrolysis. Below is a detailed NPV/IRR comparison of pyrolysis and refining within England using the newest UK data.

Key Assumptions Regarding the Local Market in England, UK

Key Local Market Assumptions (England, UK)

(Sources: UK Government, WRAP, ICIS, BP Statistical Review)

A. Feedstock Economics

Parameter	Pyrolysis (Plastic Waste)	Refining (Crude Oil)
Feedstock Cost	-£50 to £0/ton (landfill tax = £102.10/ton, subsidies apply)	$80–85/bbl (Brent crude)
Preprocessing Cost	£20–40/ton (sorting, washing)	$2–5/bbl (desulfurization)
Availability	Abundant (UK generates ~5M tons plastic waste/year)	Imported (North Sea supp

B. Policy Environment

Policy	Impact on Pyrolysis	Impact on Refining
Plastic Packaging Tax (PPT)	+£200/ton on <30% recycled plastic (boosts demand)	N/A
Landfill Tax (£102.10/ton)	Makes waste plastic cheaper than disposal	N/A
UK Emissions Trading Scheme (UK ETS)	Low impact (pyrolysis CO₂ < refining)	+£50–70/ton CO₂ cost
Subsidies (e.g., PFI, CCUS grants)	+£50–150/ton support	Limited

C. Product Market Prices

Product	Pyrolysis Output	Refining Output
Pyrolysis Oil	$70–80/bbl (linked to Brent)	N/A
Virgin Naphtha	N/A	$600–700/ton
Recycled Polymer	+£100–200/ton premium (vs. virgin)	N/A
Diesel/Gasoline	N/A	$20–25/bbl crack spread

NPV & IRR Estimates (England, UK)

*(Assumes: 50kT pyrolysis plant vs. 50kbbl/day refinery, 10-year horizon, 10% discount rate) *

Scenario	Pyrolysis	Refining
Base Case (Brent $85/bbl, Current Policies)	NPV: £40–80M IRR: 18–25%	NPV: £200–400M IRR: 10–14%
High Oil ($100/bbl) + Stronger PPT (£250/ton)	NPV: £100–150M IRR: 25–35%	NPV: £250–500M IRR: 12–16%
Low Oil ($60/bbl) + No Subsidies	NPV: -£20M to £10M IRR: 5–10%	NPV: £100–250M IRR: 8–12%

England’s Key Points

Subsidies, plastic taxes, and landfill avoidance make pyrolysis the IRR winner.

Refining wins on NPV (higher scale, stable demand), but faces carbon costs.

Pyrolysis is highly policy-dependent—without PPT/landfill tax, economics weaken.

Above $90/bbl oil, pyrolysis becomes the primary process, mirroring crude oil price movements in its output.

Breakeven Analysis for England

Pyrolysis becomes more attractive than refining when:

• Oil prices exceed £75/bbl ($90/bbl).
• Plastic tax exceeds £150/ton.
• Carbon tax exceeds £60/ton CO₂ (hurts refineries).

Example:

• If the UK raises PPT to £300/ton, pyrolysis IRR jumps to 30%+.
• If Brent drops to $60/bbl, pyrolysis struggles unless subsidies cover costs.

Recommendations for UK Investors

For Pyrolysis Projects:

• Target municipal/industrial waste streams with high landfill fees.
• Leverage PPT and CCUS grants (UK govt offers £1bn+ funding).
• Sell recycled polymers at premium (UK brands pay +£200/ton for certified recycled plastic).

For Refining Investments:

• Focus on petrochemicals (naphtha, ethylene) over fuels (declining demand).
• Co-process pyrolysis oil (e.g., BP’s HyCHLOR project) to reduce carbon costs.

Sensitivity Analysis:

A 10% change in these factors alters IRR by:

Factor	Pyrolysis IRR Impact	Refining IRR Impact
Oil Price (+$10/bbl)	+3–5%	+1–2%
Plastic Tax (+£50/ton)	+5–8%	N/A
Carbon Price (+£10/ton CO₂)	+1%	-2%

Mura Technology’s pyrolysis plant vs. Prax Lindsey’s oil refinery: A real-world project comparison.

Mura Technology’s Teesside Plant (Pyrolysis)

• Capacity: 80,000 tons/year (plastic waste)
• Feedstock: Mixed plastic waste (cost: -£50/ton after landfill tax savings)
• Output: Pyrolysis oil (80% of Brent price) + recycled chemicals
• Policy Support:
• £200/ton Plastic Packaging Tax (PPT) avoidance
• £50M UK government grant (CCUS-linked)
• Estimated Economics:
• CapEx: £150M
• OpEx: £250/ton
• IRR: 22–28% (with subsidies)
• NPV (10-yr): £180–250M

Prax Lindsey Refinery (Traditional Refining)

• Capacity: 220,000 bbl/day
• Feedstock: Brent crude ($85/bbl) + light North Sea oil
• Output: Diesel, gasoline, jet fuel
• Policy Costs:
• UK ETS carbon cost : £65/ton CO₂
• No recycling subsidies
• Estimated Economics:
• CapEx: £1.2B (upgrades for low-Sulphur fuels)
• OpEx: $6/bbl
• IRR: 9–12% (carbon tax drag)
• NPV (10-yr): £500–700M (but declining with energy transition)

Key Takeaway:

• Pyrolysis has higher IRR (driven by subsidies), but refining has higher NPV due to scale.
• Lindsey’s IRR drops to 6–8% if carbon prices double by 2030.

Advanced Sensitivity Testing

Oil Price Volatility

Brent Price	Pyrolysis IRR	Refining IRR
$60/bbl	10–14%	7–9%
$85/bbl	18–25%	10–12%
$100/bbl	25–35%	12–15%

Observation: Pyrolysis outperforms above $80/bbl.

Policy Shock (Plastic Tax Increase)

If UK raises PPT to £300/ton:

• Pyrolysis IRR jumps to 30–40%.
• Refining unaffected but faces brand pressure to use recycled feedstocks.

C. Carbon Price Surge

If UK ETS hits £100/ton CO₂:

• Refining IRR falls by 3–5%.
• Pyrolysis gains +2–3% IRR (lower CO₂ footprint).

Investment Strategies for England

For Pyrolysis Investors:

• Target waste contracts with municipalities (e.g., London pays £120/ton to avoid landfill).
• Secure long-term offtake agreements with brands (e.g., Unilever pays premiums for recycled polymers).
• Blend outputs with refinery streams (e.g., BP’s “HyCHLOR” project avoids carbon costs).

For Refining Investors:

• Shift to biofuels/petchems (e.g., converting units to HVO production).
• Co-process pyrolysis oil to reduce UK ETS exposure.
• Divest fuel assets by 2030 (UK petrol demand to drop 30% by 2035).

Future Outlook (2030 Horizon)

Trend	Impact on Pyrolysis	Impact on Refining
UK landfill ban (2028)	Feedstock costs drop to -£100/ton	N/A
Petrol car ban (2030)	N/A	Crack spreads collapse
CBAM (EU carbon border tax)	Exports gain advantage	Refiners pay double carbon costs

Projected 2030 IRR (England):

• Pyrolysis: 25–40% (policy-driven)
• Refining: 5–8% (stranded asset risk)

• Pyrolysis: Deploy in urban hubs (London, Manchester) with high landfill fees.
• Refining: Hedge carbon costs with blue hydrogen investments.

Long-Term (2028–2035):

• Exit refining unless fully transitioned to renewables.
• Scale pyrolysis 5–10x with modular plants (Mura’s “HydroPRS” tech).

In Conclusion

A strategic investment decision for savvy investors is to prioritise plastic recycling over crude oil.

The plastic recycling sector is poised for rapid short-term growth due to evolving consumer preferences and favourable regulations. In comparison, oil refining is significantly impacted by fluctuating prices and regulatory difficulties.

Sustainability and innovation are brightening the future of plastic recycling. Meanwhile, the move toward renewable energy and tighter regulations will create challenges for oil refineries. Investors ought to assess their risk tolerance and investment timeframe, and adopt diversification while comprehending regional trends, particularly in Europe and North America.

Seizing opportunities in plastic recycling is key to a sustainable future, starting now!

Authored by:

Francis Akpata
CEO at Majlis Energy

*Legal Disclaimer. The views expressed, and responsibility for the content of this publication, lie solely with the authors.