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IPTC Summit on AI for the Energy Industry

Quantum Computing for Refinery Feedstock Optimization and Beyond

Syed Farhan, Mohamed Habib Loukil, Aaron G. Frye, Gregory T. Byrd

Published Jan 13, 2026• 0 citations
Publisher

Abstract

Abstract The selection of crude oil feedstock is a critical, high-impact optimization problem in the petrochemical industry, directly influencing refinery profitability and environmental footprint. Traditional optimization methods face scalability challenges as the complexity and number of constraints increase. This paper presents an initial study on the application of quantum computing to solve a binary feedstock optimization model. We formulate the problem as a Quadratic Unconstrained Binary Optimization (QUBO) model and employ the Quantum Approximate Optimization Algorithm (QAOA) to find low-cost solutions. To manage the probabilistic nature of quantum results, we introduce Conditional Value at Risk (CVaR) as a post-processing technique to select robust, high-quality solutions. Our results on a representative small-scale problem demonstrate the viability of this hybrid quantum-classical approach, showing its potential to identify near-optimal solutions. We conclude with a discussion of current limitations and an open call for collaboration to further explore quantum computing applications in the energy sector.

DOI
10.2523/iptc-25262-ms

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Quantum finance represents a pivotal and cutting-edge application domain within the burgeoning field of quantum computing. In this work, we propose a two-step quantum approximate optimization algorithm (two-step QAOA) for portfolio optimization and risk assessment. The algorithm initiates by formulating the stock selection problem as a quadratic unconstrained binary optimization (QUBO) problem and employs a classical-quantum hybrid method to find the ground state of the Hamiltonian. We then introduce an energy-based characteristic indicator U∈[0,1), which quantitatively evaluates portfolio performance under customizable investment preferences, effectively capturing the trade-off between expected return and risk. The number of qubits required scales with the number of stocks N in the pool, and the number of Hamiltonian terms is O(N2). Numerical simulations show that the algorithm provides consistent and reasonable assessment results on both training and test datasets under different investment preferences (aggressive or conservative), validating the capability of the characteristic indicator to extract intrinsic information from the portfolios. Additionally, by incorporating warm-starting and digitized counterdiabatic techniques, the algorithm achieves improved scalability and faster convergence. Our work presents a flexible and practical algorithmic framework for applying quantum computing in the financial domain.
Quantum computing has emerged as a transformative computational paradigm, offering novel capabilities to tackle complex problems in finance—most notably in derivative pricing, risk management, and portfolio optimization. This review synthesizes recent advances in quantum algorithms and hybrid quantum–classical frameworks as applied to financial services, examining how technologies such as quantum-annealing, quantum amplitude estimation, and variational quantum circuits can improve efficiency, accuracy, and scalability over classical methods. The study provides a systematic assessment of key use-cases: (1) derivative pricing and greeks computation via quantum Monte Carlo and amplitude estimation; (2) risk management enhancements, including Value-at-Risk (VaR) and conditional VaR through quantum gradient estimation; and (3) portfolio optimization via QUBO (quadratic unconstrained binary optimization) mapping, the Quantum Approximate Optimization Algorithm (QAOA) and quantum annealing approaches. In addition to reviewing technological potential, the paper addresses critical barriers—hardware noise, coherence limitations, data integration, regulatory considerations—and outlines future research directions, including quantum-resilient cryptography in finance and industry coupling. By bringing together algorithmic, financial and regulatory perspectives, this review seeks to guide academics and practitioners toward the next frontier in financial computing.
This study explores the integration of quantum computing techniques, specifically the Quantum Approximate Optimization Algorithm (QAOA), with classical portfolio optimization frameworks through the Quadratic Unconstrained Binary Optimization (QUBO) approach. Using monthly turnover data from the National Stock Exchange of India (NSE), this paper demonstrates the construction of a QUBO matrix by encoding expected returns and covariance-based risk profiles. Binary asset inclusion constraints are introduced into portfolios and then optimised using both brute force enumeration and quantum inspired solvers. The analysis reveals those combinations including Index Futures and Index Options exhibit superior risk-adjusted performance (Sharpe Ratio≈0.286\approx 0.286≈0.286). The hybrid approach suggests the promise of quantum inspired models as means to improve financial decision making under uncertainty. The results also give a robust template for scalable asset selection models that operate within the constraints of quantum computing infrastructure.