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Hungary’s gas supply is secured, says regulator

Hungary’s energy supply is currently uninterrupted, and the country is prepared to deal with a possible natural gas supply disruption. The cross-border pipelines built in the last decade, the long-term supply contracts, the high strategic natural gas reserves and domestic production adequately guarantee the security of supply, said János Péter Horváth, President of the Hungarian Energy and Public Regulatory Authority (HEA).

“Russia is the number one primary energy supplier in Europe, producing more than 40 per cent of natural gas used and more than a quarter of oil consumed in the EU,” pointed out the president of the Hungarian regulator adding that Russia has acted as a reliable supplier in recent decades, but the war and the envisioned and partially implemented sanctions have created a new and controversial situation.

According to Mr Horváth, controversially, flagging sanctions has led to an increase in Russia’s revenues as even the threat of sanctions has been enough to push gas exchange prices to record highs after the outbreak of the war. “As a result, Russia’s energy revenues in 2022, assuming the current price level, are expected to be higher than in previous years,” said the president of HEA. He added that it also didn’t help the situation that before the war, the European gas storage facilities owned by Gazprom were not filled which had a price-boosting effect.

The president of HEA stated that Hungary maintains its position and does not support sanctions on Russian energy imports, just as other Central European Member States that are highly dependent on Russian gas and are unable to replace it in the short or even medium term.

“Sanctions would cause a significant economic shock even to those Member States that would be able to replace Russian gas with alternative sources,” emphasised Mr Horváth.

Speaking about the European Commission’s REPowerEU plan setting out the goal of drastically reducing reliance on Russian gas imports by 2030, the President of HEA underlined that the idea is ambitious but overly optimistic, as they overestimate both the level of alternative energy sources and the effect of demand-side measures. He cited as an example the replacement of Russian gas with LNG in the region, which could run into significant constraints in the absence of adequate pipeline transmission capacity.

Regarding the Commission’s proposal obliging EU countries to fill up their gas stores to at least 80 per cent ahead of next winter and 90 per cent in the following years, Mr Horváth pointed out that the European regulators also agreed in their joint position that the filling targets should be determined based on the domestic gas consumption to avoid a disproportionate burden on Member States with larger storage capacities, such as Hungary. “In addition, the EU must contribute to the cost of filling up storages which ensures the block’s security of supply,” he added.

“Hungary is prepared to deal with a possible short-term gas supply disruption,” said the president of HEA adding that since the 2009 gas crisis, Hungary has made diversification of gas sources a priority, both through the construction of physical infrastructure and the promotion of a well-functioning wholesale market. He recalled that in the last decade, bi-directional gas pipelines had been built with all neighbouring countries except Slovenia.

Speaking about the major infrastructural projects of the past years Mr Horváth highlighted that the Hungarian-Serbian gas link which allows access to gas networks of South-Eastern Europe was opened in October last year, and Hungary’s also put in operation the Szőreg storage facility, which is important for the storage of back-up (strategic) gas stocks of up to 1.2 billion cubic metres (bcm). “In terms of diversification, the most important development in recent years has been the commissioning of the floating LNG terminal in Krk, which grants access to non-Russian gas,” said Mr Horváth.

However, he reminded that currently Europe does not have enough non-Russian pipeline gas and the LNG regasification terminals built in the past years are not sufficient to cover the European gas demand in case of cutting off Russian imports.

“Landlocked Member States such as Hungary are in a particularly critical situation as floating LNG terminals cannot be built quickly and access to terminals in other Member States is limited due to capacity constraints.

The President of HEA concluded that similarly to other landlocked Member States in Central and Eastern Europe, Hungary is characterised by the dominance of Russian gas supplies and has no realistic alternative to Russian gas in the short to medium term.

With an annual consumption of 10 bcm, gas is a crucial energy source of Hungary, both in the residential heating and the power generation segments. In 2020 the share of natural gas in primary energy consumption was 33,6 per cent in Hungary compared to 24,5 per cent in the EU. About 80 per cent of this gas comes from Russia. The Hungarian government reaffirmed many times that there was no alternative in the foreseeable future to Russian gas.

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