Oil refineries underpin modern day economics, finance and engineering – without their refined\ud
products the world would stand still, as vehicles would not have petrol, planes grounded without\ud
kerosene and homes not heated, without heating oil. In this thesis I study the refinery as a financial\ud
asset; it is not too dissimilar to a chemical plant, in this respect. There are a number of reasons for\ud
this research; over recent years there have been legal disputes based on a refiner's value, investors\ud
and entrepreneurs are interested in purchasing refineries, and finally the research in this arena is\ud
sparse. In this thesis I utilise knowledge and techniques within finance, optimisation, stochastic\ud
mathematics and commodities to build programs that obtain a financial value for an oil refinery. In\ud
chapter one I introduce the background of crude oil and the significance of the refinery in the oil\ud
value chain. In chapter two I construct a traditional discounted cash flow valuation often applied\ud
within practical finance. In chapter three I program an extensive piecewise non linear optimisation\ud
solution on the entire state space, leveraging off a simulation of the refined products using a set of\ud
single factor Schwartz (1997) stochastic equations often applied to commodities. In chapter four I\ud
program an optimisation using an approximation on crack spread option data with the aim of\ud
lowering the duration of solution found in chapter three; this is achieved by utilising a two-factor\ud
Hull & White sub-trinomial tree based numerical scheme; see Hull & White (1994) articles I & II\ud
for a thorough description. I obtain realistic and accurate numbers for a topping oil refinery using\ud
financial market contracts and other real data for the Vadinar refinery based in Gujurat India