Hungary to Increase Russian Gas Supplies

Hungary to Increase Russian Gas Supplies

Hungary has reached an agreement with Gasprom on increased gas supply to replenish the reserves of the country during the autumn-winter period, Hungarian Prime Minister Viktor Orban said after the talks with Gazprom CEO Alexey Miller. 

The country’s gas storage facilities are currently 61% filled. Increasing Russian gas supplies is the only way to improve the situation. The decision should have been taken a long time ago. Some disagree. There are also those who express discontent with the Budapest’s decision to suspend reverse flow supplies to Ukraine. 

Until recently gas was delivered through Hungary, Poland and Slovakia. According to Ukrtransgas, by the beginning of 2014 the gas supplies from the European Union to Ukraine had gone up to around two billion cubic meters, about a third more in comparison with January-September 2013. As winter approaches, many Europeans started to doubt that this policy meets their interests. Hungary’s gas operator FGSZ Ltd. suspended natural gas supplies to Ukraine for an indefinite period of time. The decision was made to meet the growing domestic demand for gas. «Gas supplies have been halted for an indefinite period of time», the company said in a statement. «In order to manage the security supply and preserve the network balance, the Beregdarуc network point connection has to be altered to enable all pipelines to be suited for inward transmission», FGSZ said. 

Kiev immediately said the decision was politically motivated and there was no reason to justify the suspension. Some time later Andriy Kobolev, the head of Ukraine's national energy company Naftogaz, and Sabine Berger, press secretary of the EU Energy Commissioner, had to admit that the decision was substantiated by the need to increase gas reserves in Hungary. 

The reverse flow to Ukraine would reduce the EU gas storage. Energy Minister Alexander Novak said the re-export to Ukraine of gas Europe buys from Russia was illegal, "The agreed contracts do not foresee a re-export," Russian Energy Minister Alexander Novak told Germany's Handelsblatt business daily (September 24), "We hope that our European partners will stick to the agreements. That is the only way to ensure there are no interruptions in gas deliveries to European consumers." 

Being too much concentrated on the issue of Ukraine and refusing further energy cooperation with Russia Europeans put their own energy security into jeopardy. That is the only conclusion one can come to in view of the EU’s policy leading to a conflict with the main energy supplier. These are the facts adduced in the report by Alexey Miller: «In 2013 Gazprom supplied Europe and Turkey with 162.7 billion cubic meters of natural gas in 2013 – a record high in the entire history of the Russian and USSR gas industries. We increased gas supplies to Europe by 16.3 per cent compared to last year. We achieved such a result while other suppliers reduced their deliveries, i.e. Qatar – by 20.7 per cent, Nigeria – by 38 per cent, Algeria – by 19 per cent, the UK – by over than 6 per cent and Norway – by almost 5 per cent. We managed to increase our export supplies, despite a fall in annual European gas consumption, which averaged 1.5 per cent per year during the past three years. Growing business in declining markets – this is the outcome to be envied by other top energy companies. What is our formula for success? The answer is simple and lies in our commitment to the strategic principles in our relations with business partners and consumers, as well as the right choice of priorities. We took advantage of gas trunk lines in addition to a trading system based on long-term contracts. Under the present market conditions, we timely adjusted our contracts while leaving their fundamental principles unchanged, including the linkage to oil prices. A decline in domestic gas production in European countries and the shift of LNG shipments from Europe to Asia, of course, also stimulated the growth of our own gas supplies. And we were able to seize this opportunity only because we had plenty of resources and transmission capacities». 

No matter that, Europe keeps on turning a blind eye on the facts. Brussels is seriously concerned over the Hungary’s decision to suspend reverse flow to Ukraine and its arrangement with Moscow. Helen Kearns, Spokesperson for Transport, European Commission, expressed hope that all the EU members will comply with the decisions by the EU Council and provide reverse flows of gas to Ukraine. But it’s getting harder to implement the decision under the circumstances. 

Commenting on the upcoming round of gas talks between Russia, Ukraine and the European Union Newsweek cited an anonymous source assessing the consequences of sustained gas cutoff for Europe. «People in democracies notice their energy bills. They will not tolerate power cuts. Clearly, [Western] politicians have to take account of this», says one senior Western diplomat with knowledge of the European Union’s internal debates on sanctions.