Hungary's Energy Security: LNG and Russia Key Sources

At the Gas Dialogues event in Budapest, Hungary, Development and Use of Natural Gas in the Danube Region: Prospects and Opportunities, Mr. Csaba Kiss, Advisor to the CEO, MVM Hungarian Electricity Ltd., said that to ensure a supply of natural gas for Hungary, LNG and Russia were clearly the only options.

He explained, “We have to come to terms with increasing the supply from Russia – there's no other way around it. There might be political debates about Ukraine, there might be different views on the Third Energy Package, but there is no other way; we need to find a way to continue to import from Russia.”

Mr. Kiss said a big blue line on his presentation represented the South Stream pipeline project of which MVM was a member.

He stated, “We have successfully completed the design work of the Slovenian route – from Serbia to Slovenia - we've completed the design phase of that, and now we have three other lines, which are the three possible lines towards Austria. We haven't started the design work yet, so I can't yet say which is the most optimal route towards Austria, but hopefully by the end of the year we'll pick the most optimal route and start the detailed phase of the design work for the Austrian route.”

According to him, the difference between the Austrian and Slovenian route was that the latter was over 100km shorter, but there would be no difference in the timing of the project depending upon which route was chosen. “So either we go to Slovenia or we go to Austria, it doesn't matter. By 2017, this pipeline should be operational. We can still deliver this project timeline depending on the discussions with the European Union, because if the debate with Russia continues over the South Stream project, obviously it might have an impact on the timeline, but today the delivery is still possible, commissioning in 2017.”

Mr. Kiss emphasized the importance of the project for Hungary, increasing the country's supply security and diversifying the routes, which could provide a comforting effect.

It was also necessary, he said, to find a way to make LNG available to Hungary, perhaps through Poland or Croatia, calling LNG “part of our future.”

According to Mr. Kiss, no one was debating that the demand for natural gas in Europe was increasing. Meanwhile, he noted that both indigenous gas production, both in the EU and in Norway, was decreasing. This meant, he explained, that Europe needed to rely on two sources that could increase supplies: Russia and LNG. He commented, “Both of them need infrastructure development. We do need infrastructure development in Europe just to keep up the supply of natural gas.”

He noted that in Central Europe, all transit pipelines went from east to west.

“We welcome all the initiatives that come from north to south or south to north to connect all these pipelines,” he said.

Mr. Kiss called a pipeline from northern Poland coming down through the Czech Republic a “very necessary development” for Europe, while the interconnector between Greece and Bulgaria (IGB), he added, was also a very important initiative for the supply of Europe.

Explaining what MVM was doing to increase Hungary's supply of natural gas, he said: “Coming from this perspective that we do need more gas in the future from Russia, we might need more gas from LNG sources and, in order to bring this gas to Hungary, we need infrastructure development.”

As part of this, he recalled that MVM had taken inventory of the possible natural gas sources for Hungary which could bring gas. “MVM feels a responsibility for making these sources available for Hungary and has taken a number of initiatives and had a series of discussions with possible suppliers to check if these are realistic sources or not,” reported Mr. Kiss, who presented a list of those possible sources.

To increase Hungary's supply security and to diversify the supply of natural gas, Mr. Kiss said that MVM was a member of the Interconnector Azerbaijan-Georgia-Romania-Hungary (AGRI) project whose feasibility study was near completion. “The next steps will depend upon what we have in the feasibility study and what other projects come into realization.”

Meanwhile, he said that important milestones had been achieved regarding the Hungary-Slovakia natural gas interconnector, which he said would soon undergo test trials. “In Q1 2015 we'll start the commercial operation,” he reported.

Drew Leifheit is Natural Gas Europe's new media specialist.