Could Hungary shift from Russian gas by diversifying energy sources?

Over the past two years, Foreign Minister Péter Szijjártó has engaged in numerous negotiations on energy issues with countries such as Oman, Kazakhstan, and Trinidad and Tobago. These discussions, involving gas procurement and cooperation agreements, aim to reduce Hungary’s reliance on Russian gas.

If even half of these deals come to fruition, a significant portion of Russian gas could be replaced, reports G7. In 2022, Hungary’s gas supply route changed significantly, indicating an increase in non-Russian gas. About 1 to 1.5 billion cubic meters (bcm) of gas flowed from Romania and Croatia, marking a notable rise from the previous year. The volume from Romania increased further to almost 1.5 bcm last year, with similar trends expected in 2024. Experts identify these routes as key sources of non-Russian gas.

Importance of diversification over Russian gas?

Diversifying gas sources has been a long-standing issue for Hungary, which has relied heavily on Russian gas, posing energy security risks. Previously, infrastructure limitations prevented alternative sources. Over the past decade and a half, pipeline construction and European gas market liberalisation have changed this. However, visible diversification did not occur in the 2010s. State-owned MVM re-signed a long-term agreement with Gazprom, though for smaller volumes than in the 1990s.

The crisis and the Russian-Ukrainian war prompted the government to address diversification more seriously. In recent years, Szijjártó has visited countries with substantial natural gas production, irrespective of whether the gas could be transported to Hungary. He held talks with over a dozen partners on natural gas procurement and transportation.

In June last year, he announced in Baku that MVM Group and SOCAR of Azerbaijan would deliver 100 million cubic meters of natural gas to Hungary by 2023. Although this did not occur, Azerbaijani gas was delivered to Hungarian storage facilities this spring.

More importantly, MVM acquired a 5% stake in the Shah Deniz gas field in Azerbaijan. Shah Deniz, one of the world’s largest gas fields, produces around 29 bcm annually. This acquisition means Hungary could have a share of around 1.5 bcm. The Foreign Minister stated this deal “will put Hungary’s security of natural gas supply in a completely new dimension.”

After visiting Doha in January, Szijjártó reported progress in negotiations between MVM and QatarEnergy, potentially adding Qatari liquefied natural gas to Hungary’s energy supply by 2026.

In Sochi, Russia, four weeks later, Szijjártó signed a deal with Turkey for 275 million cubic meters of natural gas, making Hungary the first non-neighbouring country to receive Turkish gas. A month later, in Budapest, the minister extended a contract with Shell for 250 million cubic meters of liquefied natural gas annually until 2027. This gas will be converted back to natural gas in Krk, Croatia, and then transported to Hungary.

These key announcements indicate that Hungary could acquire 3-5 bcm of natural gas from new sources per year, enough to replace the long-term contract with Russia.

However, Szijjártó’s statement suggests the government aims to expand rather than replace its relationship with Russia. The current contract with Gazprom stipulates a fixed annual volume of 4.5 bcm until 2031, meaning MVM will continue to purchase this amount for another seven years.

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Featured image: depositphotos.com

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