Pakistan State Oil’s board has reportedly given the go-ahead sought to execute a renewed five-year Sale Purchase Agreement (SPA)—a long-term contract for buying refined fuel—with Pak Arab Refinery Limited (PARCO). The draft would sharply raise monthly supplies of motor gasoline and high-speed diesel (HSD) to PSO while cutting furnace oil volumes, according to sources familiar with the proposal.
Under the terms described by those sources, PARCO’s monthly allocation of RON 92 motor gasoline to PSO would rise from 18,000 tonnes to 50,000 tonnes. Monthly HSD would more than double, from 50,000 tonnes to 105,000 tonnes. Furnace oil would drop from 32,000 tonnes a month to 5,000 tonnes—about 60,000 tonnes a year, down from 384,000—reflecting weaker demand as power plants use less of that fuel.
What the renewed SPA is meant to do
The agreement would run for five years from the date it is signed. Its aims, as framed for the board process, include firmer access to domestic refinery output, better supply security, and updated rules on pricing, invoicing, payment security, product quality and measurement.
PSO management expects larger petrol and HSD offtake from PARCO to reduce reliance on imports and the freight costs of long sea voyages. Lower furnace oil buying is meant to free working capital tied up in a product whose market has shrunk.
Quality, payments and other commercial changes
The draft commercial framework would require RON 92 and RON 95 gasoline to meet Euro-5 specifications—stricter limits on sulphur and other pollutants. Jet A-1 aviation fuel would be tied to the latest DEFSTAN and AFQRJOS guidelines used internationally. An updated health, safety and environment (HSE) clause would cover downstream logistics, with the intent of cutting quality disputes and aligning supplies with regulatory standards.
On payments, PSO could offer an irrevocable letter of credit (LC)—a bank guarantee of payment—in PARCO’s favour, or pay on the due date without opening an LC. Sources say the revised late-payment formula drops a previous 300-basis-point escalation after 30 days and shields PSO from mark-up caused by bank delays in processing LCs. Measurement, invoicing and LC paperwork would also be clarified. PSO’s legal and operational teams have vetted the final draft.
Timeline: what has happened so far
- 1 August 2011: The existing 10-year principal SPA between PSO and PARCO takes effect.
- 31 July 2021: That agreement expires; PARCO later confirms it and three addenda stay in force until a new SPA is signed.
- 20 March 2025: PARCO writes to confirm existing arrangements continue pending the renewed SPA.
- 26 January 2026: The Supply Coordination Committee recommends renewal with agreed amendments.
- 23 February 2026: The Management Committee approves the renewal.
- 26 March 2026: The Management Committee tells the Supply Function to put PARCO, Attock Refinery Limited (ARL) and Cnergyico Pk Limited renewals to the Board of Management; only PARCO and ARL are submitted because Cnergyico has not unconditionally withdrawn its lawsuit against PSO.
Negotiations ran longer than planned as both sides aligned terms with market conditions, rules and industry practice, and as talks on the WOP Multigrade Agreement and the MFM Transportation Agreement, plus a change in PARCO’s top management, proceeded in parallel.
Aasan alfaaz mein
PSO aur PARCO ke beech naya paanch saal ka fuel khareedne ka muahida tayyar hai. Is mein petrol aur diesel ki mahana supply barhegi, furnace oil kam hoga. Is se local refinery se petrol-diesel milne ka bandobast mazboot hone ka imkaan hai. Aam logon ke liye seedha faida yeh hai ke supply zyada stable ho sakti hai; pump rates is board approval se khud nahi badalte.
