· Increased geo-political tensions have forced Europe and US to increase their reliance on LNG, causing LNG spot prices to soar, increasing by 30% in last two weeks while increased global demand will keep prices elevated in medium term, in our opinion.

· A direct impact of increased LNG prices is an increase in import bill with LNG constituting 24% of Pakistan’s energy imports bill while recent defaults by suppliers will force Pakistan to choose between higher LNG prices or gas shortage locally.

· For players based in Punjab, cost of gas is expected to increase while second round impact will involve higher electricity prices with LNG forming 17% of the power mix for 8MFY22. We highlight PIOC, DGKC, DOL, SPL and Punjab based glass manufacturers as some of the major casualties of higher gas and electricity prices.

· PSO will be single biggest casualty of increasing LNG prices from the listed universe where company’s receivables from SNGP have already soared to PkR176bn as of Dec’21 against PkR98.6bn as of Jun’21 and with LNG prices continuing to remain elevated and political uncertainty causing a delay in implantation of WACOG bill, short term borrowings of PSO are only going to increase.

Courtesy – AKD Research