VILNIUS: Lithuania's plans to reduce its dependence on Russian gas by importing liquefied natural gas (LNG) could come at a higher-than-expected cost following Japan's 2011 Fukushima disaster, the firm negotiating the country's first LNG supply deal said.
Lithuanian officials have previously said they expected imports of super-cooled gas to help to lower gas prices by 20-30 percent from what the country pays for Russian gas.
But the company negotiating LNG supply into Lithuania said it was a "challenging" task to find cheaper deliveries.
"The challenge is not to get gas, but to get gas at a lower price than Gazprom sells today," Dominykas Tuckus, chief executive of UAB Litgas, told business daily Verslo Zinios.
When the Baltic state decided to build an import terminal in 2010, global LNG supply was abundant and it was priced well below gas sold at oil-indexed prices.
But LNG prices surged after the Fukushima disaster, when Japan shut most of its nuclear reactors and had to start importing more LNG to generate power.
LNG costs are expected to remain high as new Asian and South American importers compete for scant supplies until new projects in Australia and the United States come online after 2015.
Lithuania is currently paying $14 per million British thermal unit (mmBtu) for Russian gas compared with about $16 paid for gas by customers in Japan and $11 in the UK, officials said.
Last year, Lithuania called a tender to supply 0.75 billion cubic metres (bcm) of regasified LNG per year, but plans to sign the contract were postponed several times.
Tuckus said he now expects a five-year LNG supply deal to be signed in the first-quarter of 2014 at a value of at least 2.5-3 billion litas ($0.9-$1.2 billion).
An Oslo-based consultancy Sund Energy advises Litgas, which is two-thirds owned by the country's biggest power producer UAB Lietuvos Energija.
Meanwhile, neighbouring Poland, which also plans to start LNG imports in 2015, has got locked into an expensive 20-year supply contract with Qatari state-run exporter Qatargas.
Based on current prices, the Qatari imports scheduled to start in 2015 would cost at least a third more than what Russia charges for deliveries to Europe.
While Lithuania has no contract to supply LNG yet, work to have an import terminal by end-2014 are in full swing.
A company developing the terminal's project, Klaipedos Nafta , has signed a deal to lease a floating gas storage and regasification unit (FSRU) from Norway's Hoegh LNG for ten years at a price of 43 million euros ($58.47 million) per year.
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