For all Central and Eastern European countries, the 2006-2009 Russia-Ukraine gas crises were painful tests of realism that brought home the real danger of dependency upon Russian supplies. Hungary, a country that obtains 80 per cent of its natural gas imports from just this one source, seems to have learned the most from these lessons.
It is true that in Hungary’s energy mix, gas is still the most important, at about 40 per cent. In fact over the past 40 years this number has more than doubled, making the country the fourth-highest gas consumer in the European Union in terms proportion of energy sources. Although some quantities of unconventional gas were found in the Makó area, extraction with currently known techniques is commercially unviable.
The land of connections
However, what in a medium run contributes much to supply routes’ and sources’ diversification is sensible policy-making to build out a regional gas interconnectors’ grid. Out of seven neighbours, Hungary already has interconnectors with its gas transmission system with five and another one is expected to be completed in 2015.
These interconnectors certainly ensure access to gas at more competitive prices and to alternative routes. For instance, in the near future Hungary may be able to receive liquefied natural gas from the planned terminal on Croatia’s Adriatic coast and, in turn, its lines with Romania and Slovakia will allow the country’s infrastructure to integrate with the Azerbaijan-Georgia-Romania Interconnector (AGRI) and the North-South Gas Corridor, respectively.
Safety in storage
Hungary, though, is not only well-embedded in the regional market but also having fortunate geological conditions as such owns the largest underground gas storage infrastructure in Central Europe. It has five commercial gas units with a total capacity of 6.1 billion cubic metres.
These units not only help maintain pressure in the pipelines during winter when there is higher consumer demand, but when also coupled with interconnectors can efficiently manage risk against crises in the region. This was proved in 2009 when Hungary made available emergency supplies from its stockpiles to the Western Balkans.
Plenty to tap into
All these developments may be particularly beneficial because, apart from Bulgaria, Hungary is the only country in the region that can play multiple cards by participation in all the big transnational projects: Nabucco West, South Stream and AGRI.
The prospects for building South Stream are becoming more and more realistic. On 31 October Hungary signed a final investment decision with Gazprom. But the country is also a member of the EU-backed Nabucco West. After alleged intentions to quit this project, Budapest surprisingly was the first to submit environmental permits – a sign of commitment.
No matter which pipeline is eventually completed, it is certain that Hungary will be a crucial transit country because of both its developed gas infrastructure and the geographic proximity to the gas hub in Baumgarten.
Gas-trading exchange platform
Moreover, as in 2013 Hungary plans to open its own gas-trading exchange platform, the CEEGEX, the country can be made a foothold as a brand new regional gas hub. Especially so, if the the liquidity of gas trading on the new platform will be increased with the arrival of competing Caspian and Russian gas in the future.
Increasing state control
However, what seems somehow problematic is the strategy by Prime Minister Viktor Orbán’s government to increase state control over the country’s gas sector. With the potential final objective to fuse the key actors on the country’s energy market – MVM and MOL – Orbán seems to plan to build not only a strong national monopoly but also a highly competitive regional actor. This certainly fits well with the idea of Hungary as a future major energy player in Central Europe.
From the EU point of view Hungary’s moves are not so welcome because they are much less liberal than the EU policy line. As the European Commission aims to complete the single energy market by 2014, it will probably closely watch future developments on the Hungarian market.
Whatever the EU reaction, in the near future Hungary’s energy supply security will improve as will its position on the regional energy market. These trends will be underpinned by its advantageous geographical location and farsighted policy.
In fact in the mid-term Hungary’s strategic position on the gas market may become similar to the one held by Ukraine, which is transitted by the Brotherhood gas pipeline.
– The authors are Central Europe analysts at the Polish Institute of International Affairs, Warsaw. www.pism.pl