PSO board reportedly clears renewed five-year SPA with PARCO

Pakistan State Oil's board has reportedly given its approval to execute a renewed five-year Sale Purchase Agreement with Pak Arab Refinery Limited, a deal that would raise monthly motor gasoline and high-speed diesel allocations while cutting furnace oil supplies sharply. The reported approval was first carried by Business Recorder.

Under the proposed terms, PARCO's monthly motor gasoline (RON 92) allocation to PSO would rise from 18,000 tonnes to 50,000 tonnes, and monthly high-speed diesel from 50,000 tonnes to 105,000 tonnes. Monthly furnace oil would fall from 32,000 tonnes to 5,000 tonnes, or from 384,000 tonnes annually to 60,000 tonnes, reflecting the power sector's reduced reliance on the fuel. PSO management is said to expect the lower furnace oil volumes to prevent capital from being tied up in a product whose demand has declined as the power generation mix shifts away from furnace oil.

The original ten-year principal agreement, executed on 1 August 2011, expired on 31 July 2021. PARCO confirmed in a letter dated 20 March 2025 that the expired agreement and its three addenda would remain fully effective until a renewed SPA was formally signed, maintaining supply continuity through the negotiations. Talks covered pricing, invoicing, letter of credit documentation, product quality and measurement, and were also affected by parallel negotiations on the WOP Multigrade Agreement and the MFM Transportation Agreement, as well as a change in PARCO's top management.

The Supply Coordination Committee recommended renewal at its meeting on 26 January 2026, and the Management Committee approved it on 23 February 2026. On 26 March 2026 the Management Committee directed the Supply Function to submit renewals with PARCO, Attock Refinery Limited and Cnergyico Pk Limited to the Board of Management for final approval. The Cnergyico renewal is not being submitted alongside the others because the company has not agreed to unconditionally withdraw its legal suit against PSO, a condition precedent under the relevant management approval.

The revised framework would require RON 92 and RON 95 to meet Euro-5 specifications and bind Jet A-1 quality to the latest applicable DEFSTAN and AFQRJOS guidelines, alongside an updated health, safety and environment clause for downstream logistics. Payment security would become more flexible, allowing PSO to provide an irrevocable letter of credit in PARCO's favour or make direct payment on the due date without opening an LC, and the late-payment formula would remove the previous 300-basis-point escalation after 30 days. PSO's legal and operational teams have vetted the final draft, according to the sources.