This work proposes the application of methane decomposition (MD) as a fuel processor to replace methane steam reforming (MSR) for hydrogen production for a methane-fuelled solid oxide fuel cell (SOFC) system. In this work, comparison between the MD-SOFC and the MSR-SOFC was performed in terms of SOFC performances and economic analysis to demonstrate a benefit of using MD as a fuel processor. Energy analysis of SOFC system was evaluated based on thermally self-sufficient condition where no external energy is required for the system. Although the MD-SOFC system offers lower electrical efficiency than that of the MSR-SOFC as solid carbon is generated without being further combusted to generate energy; however, the MD-SOFC stack can be operated at higher power density due to high purity of hydrogen supplied to the fuel cell, resulting in smaller size of the system when compared to the MSR-SOFC. Moreover, the MD-SOFC system is less complicated than that of the MSR-SOFC as the CCS facility is not necessary to be included to reduce CO2 emission. Economic analysis demonstrated that the SOFC system with MD is more competitive than the conventional system with MSR when considering the valuable by-products of solid carbon even with the low-valued carbon black. It is suggested that the success of this proposed SOFC system with MD relies on the technology development on cogeneration of hydrogen and valuable carbon products. (C) 2012 The Institution of Chemical Engineers. Published by Elsevier B.V. All rights reserved.