Overcontractors – Newspaper Kommersant No. 63 (7508) dated 04/12/2023
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Hungary agreed with the Russian government on gas supplies in excess of the contract for the period of preparation for the new winter season, as well as on the deferment of payments for supplies under the main contract in case of price increases. Overcontract volumes will be supplied via Turkish Stream. Hungary remains the only EU country that receives gas from the Russian Federation in full contractual volume – about 4.5 billion cubic meters of gas per year.
On the eve of the upcoming winter season, Hungary will be able to receive an over-contract volume of pipeline gas through the Turkish Stream, Hungarian Foreign Minister Peter Szijjártó said following talks in Moscow. In addition, the parties agreed on a preferential payment regime for the main long-term gas contract, as well as the possibility of obtaining a deferred payment if they are above a “certain limit in the event of extreme price increases” for gas, the head of the Hungarian Foreign Ministry noted.
In particular, according to him, the price of gas that will be supplied to Hungary via the Turkish Stream will be limited to €150 per 1 MWh. If this price level is exceeded, Hungary will be able to defer payments. Now the price of gas at the TTF hub in Europe is about €43 per 1 MWh, but in August-October 2022 it exceeded €150 per 1 MWh.
“We managed to agree that Gazprom will retain the ability to buy and supply volumes of natural gas in excess of the amount specified in long-term contracts, mainly through the Turkish Stream. Today we extended the agreements regarding this possibility,” said Peter Szijjártó.
He also said that Hungary is ready to continue loading the Druzhba pipeline through Ukraine with oil, and the Hungarian concern MOL will pay transit fees to the Ukrainian pipeline operator. Recall that Ukrtransnafta refused to accept payments from Transneft due to sanctions, and then doubled the amount of the transit fee.
Moscow and Budapest have also amended the contract for the modernization of the Paks II nuclear power plant, including the details of the project’s financing, which will “guarantee its implementation,” Mr. Szijjarto said.
Peter Szijjártó, Hungarian Foreign Minister11 April:
“It was decided to keep a number of agreements in force, according to which, in the event of a sharp increase in prices (for gas), Hungary retains the possibility of deferred payment.”
Long-term contract with Hungary suggests supply of 4.5 billion cubic meters of gas per year for 15 years from 2021, of which 3.5 billion cubic meters are supplied through Serbia and the Turkish Stream, 1 billion cubic meters through Austria, where the gas enters through Slovakia and Ukraine. In September and October 2022, Hungary purchased another 5.8 million cubic meters per day through the Turkish Stream under an additional agreement. With Nord Stream’s facilities no longer operating and most European customers ditching Gazprom’s services, supplies to Hungary now account for about a third of Russia’s gas exports to the EU. At the same time, all volumes to Hungary now go via the Turkish Stream, since Greece and Bulgaria, which previously received gas via this route, refused supplies last year.
Gazprom announced that it would consider the possibility of supplying super-contract gas volumes to Hungary in 2023 and applying a deferred payment for these supplies. No additional comments were provided.
Despite the Russian military operation in Ukraine, EU member Hungary continues to maintain relations with Moscow and opposes sanctions on Russian hydrocarbons. Supplies from the Russian Federation account for about 85% of Hungary’s gas imports, the country also has access to LNG terminals in Croatia and Poland and is negotiating gas supplies with Azerbaijan. Currently, Hungary’s UGS facilities contain about 2.8 billion cubic meters of gas, or about 43% of their total capacity. This is one of the lowest rates among EU countries.
Historically, Hungary has relatively large UGS facilities (6.6 billion cubic meters), which, when fully filled, cover the demand for gas in the country during the entire autumn-winter period, said Sergey Kondratiev from the Institute of Energy and Finance. According to him, maintaining increased supplies from Russia will allow Hungary to ensure the filling of UGS facilities up to 85-90%.
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