KARACHI: Pakistan State Oil (PSO) and Pak Arab Refinery Limited (Parco) have signed an agreement whereby the latter will provide POL products to the former from its mid-country refinery.

Parco is Pakistan’s only refinery capable of producing low sulphur Euro II quality diesel, says a spokesperson of PSO.

He said the refinery’s throughput would increase to 80 per cent from 50 per cent and PSO will get the POL products as per its market share.

He recalled that previously refineries used to allocate POL products as per the respective market shares of various oil marketing companies (OMCs) and PSO’s priority used to be on international payments to save the company and country from default. The financial constraints did not allow the company to make timely payments to the refineries due to which local production suffered, he said.

Now PSO management has embarked upon a strategy of domestic self-reliance by maximising fuel uplift from local refineries.

This will result in multiple benefits including reduced dependency on foreign fuel imports, increased throughput of local refineries and savings of foreign exchange worth an estimated $130 million per annum.

According to the terms of this accord, PSO will open local Letters of Credit (LC) for Parco which will result in confirmed payments to the refinery in a timely manner thereby enabling Parco to increase its production.

The spokesperson said this arrangement promises to be a win-win situation for the country, its people as well as the companies.

According to this agreement, PSO will be able to strengthen its product supply chain and avoid tying up its funds in bulk imports, while Parco would benefit through a more cost effective utilisation of its refinery operations.

Furthermore, savings on inland freight charges for motor gasoline and diesel transportation from port to mid-country region would provide additional benefits to the end consumers.