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Hungary in talks with Russia on new gas supply deal

After speaking with Russia’s new Energy Minister, Nikolai Shulginov, Hungarian Foreign Minister Péter Szijjártó said that Hungarian and Russian state-owned companies involved in the natural gas trade between the two countries could begin talks on a new gas supply deal, as the current long-term agreement is expiring in October 2021.

The Foreign Minister added that Hungary’s gas supply security will increase significantly once the gas pipeline capable of delivering an annual 6 billion cubic metres (bcm) of gas to Hungary from the South will be completed in next October. This amounts to approximately 60 per cent of the country’s annual consumption.

To enable gas purchases from the South, Hungary commissioned the construction of a 15-kilometre pipeline section from the Serbian-Hungarian border connecting to its national pipeline system.

The interconnection will allow Hungary to import gas from the Turkish Stream pipeline which carries Russian gas on two parallel strings with an annual capacity of 15.75 bcm of gas each. The first ships gas to Turkey while the second line continues to Europe, via Bulgaria, Serbia and eventually Hungary. The pipeline project is a strategic element of Moscow’s efforts to circumvent its traditional gas transit routes to Europe from the South and cut off Ukraine from the shipments.

In July, Hungary signed a trade agreement with Russia’s state-owned energy group Gazprom to purchase 4.2 bcm of natural gas for one year starting from October.
At that time, Mr Szijjártó underlined that Hungary’s goal is to be able to conclude a long-term agreement covering three five-year periods, which may be exited at the end of each five-year phase. He pointed out that this would assure a long-term supply of gas and at the same time allow for renegotiation or exit if better opportunities arise, or if there was a change in the international energy market.

Hungary also concluded this year another important gas purchase agreement, which is the first long-term supply contract in the history of the country with a Western player. Speaking at the Budapest Energy Summit, the Hungarian Foreign Minister pointed out that Hungarian companies booked 1 bcm of capacity annually at the Krk LNG terminal in Croatia, which will be operational will be operational from the beginning of next year.

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