KARACHI: Byco Oil Pakistan Ltd and Pakistan State Oil (PSO) have signed a product sale and purchase agreement (SPA) which will ensure guaranteed sale of 65 per cent of Byco’s production of various petroleum products from its new 120,000 bpd refinery to PSO.

This sale of petroleum products will substitute equivalent volume of imports being presently made by PSO particularly of products such as mo-tor gasoline, HSD and HSFO.

The agreement was signed by PSO Managing Director Naeem Yahya and Country Business Head Byco Oil Pakistan M. Qaiser Jamal on May 18.

Byco will make sales to PSO against a confirmed letter of credit. The agreed payment arrangements will benefit the refinery to ensure timely collection of its dues which will greatly help in reducing the element of circular debt, says a press release.Byco’s new oil refinery with a crude oil processing capacity of 120,000 bpd is expected to attain mechanical completion by end of next month. This would be followed by pre-commissioning and commissioning activities leading to commercial operations by fourth quarter of 2012. Along with the existing 35,000 bpd refinery, the commissioning of the new refinery will make Byco the single lar-gest crude oil refiner in Pakistan. A spokesperson of PSO, in a statement, said as part of the new vision, PSO has embarked on a mission to strengthen the petroleum products’ supply line by maximising fuel uplift from local refineries and local fuel oil blenders.

Besides Byco, the PSO has also entered into sale purchase agreement and renegotiated its contract with a leading refinery Parco and one local fuel oil blender i.e. Bakri Trading Company.

This initiative will reduce the nation’s dependence on imported oil products and foreign exchange expenditure besides encourage foreign investment and maximize local refineries’ through-put.

In the recent agreements signed by the company, the payment modalities will involve PSO opening Letters of Credit (LCs) for its suppliers. However, this arrangement can only be sustained if back-to-back LCs from the power entities are ensured to PSO so that the payment cycle in the energy sector is streamlined.