To agree on ‘take or pay’ clause in SPAs: Ogra asked to call meeting of refineries, OMCs

ISLAMABAD: The Oil & Gas Regulatory Authority (Ogra) has been asked to summon a joint meeting of refineries and oil marketing companies (OMCs) to agree on “take or pay” binding clause in the Sales Purchase Agreements (SPAs) for smooth uplifting of local products.

A letter sent to the regulator emphasized all the five refineries have legal contractual agreements with oil marketing companies to whom they supply POL products which cover supply and commercial agreements.

The letter written on February 27, 2025 is signed by Managing Directors (MDs) of Pak-Arab Refinery Company Limited (PARCO), Pakistan Refinery Limited (PRL), National Refinery Limited (NRL), Cnergyico PK Limited (CPL) and Attock Refinery Limited (ARL).

The letter appreciated Ogra’s suggestion for amending supply agreements with OMCs to incorporate a binding clause “take or pay” to address uplifting issues.

The refineries said, “It is important to highlight all such changes can only be incorporated in the supply agreements if these are mutually agreed by all stakeholders through a clear implementation mechanism and its enforcement is monitored and ensured by Ogra”. They said it is not the responsibility of refineries to ensure applications of SOPs to prioritise local production irrespective of increasing or declining price trend. The refineries stressed Ogra as a regulator and supply/demand coordinator needs to ensure application of its rules and SOPs.

Referring to the meeting held on February 10 last month, the letter mentioned all the refineries had raised serious concerns regarding challenges in product off-take resulting from failure of OMCs to uplift committed quantities of HSD and Mogas as agreed in the product review meeting.

The refineries had also asked Ogra to direct OMCs to uplift committed quantities of POL products from local refineries. It is essential for smooth refineries’ operations.

Only actual deficit volumes to be imported as has been clearly stipulated under Rule 35 (g) of Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules 2016, which is the premise under which they have been granted licence, they said. The refineries opined Ogra must ensure local POL product is prioritised for upliftment before allowing any deficit imports as clearly stipulated in Rule 35(g).

The Ogra on February 20, 2025 asked the refineries and OMCs to sign supply-purchase agreements (SPAs) with a binding clause of “take or pay” so that issue of short upliftment of POL products of refineries could be resolved.