Hungary Natural Gas Security Policy
This report is part of Natural Gas Security Policy
Natural gas overview
Hungary’s national stockholding agency can use its emergency natural gas stocks to supply the local market in the event of a major supply disruption, while a variety of pre-determined demand restraint measures can also be imposed by government decree, if required.
Despite little significant growth in natural gas demand in Hungary over the past decade, natural gas remains a very significant energy source for the country and will likely constitute a significant proportion of the energy mix through 2030, and beyond, when the Mátra lignite-fired plant will be closed and replaced with a 500 MW gas-fired plant (plus a solar array and other smaller generation units). With limited domestic production, Hungary relies on imports, particularly from Russia. Since 2021, Hungary has also had the ability to import liquefied natural gas (LNG) cargoes via the Krk LNG terminal in neighbouring Croatia, and it will soon be able to import volumes through Serbia via the TurkStream pipeline.
HUSA, the public stockholding agency, holds strategic natural gas stocks at an underground storage facility located in Szőreg, in southern Hungary. Emergency stocks would be sold to suppliers at a price that is determined by a formula based on average natural gas prices in the previous quarter. Demand restraint measures can also be implemented to curtail gas consumption, however, no systematic categorisation or assessment of the quantity of natural gas that could be saved by groups of demand restraint measures has been undertaken.
Note: Transport consumption of natural gas is not visible at this scale (less than 0.1 bcm).
Natural gas infrastructure
Networks: transmission and distribution
Hungary has six gas interconnection points, with Beregdaróc, on the Ukrainian border, being the source of the majority of Hungary’s natural gas imports in 2020. Some natural gas is also exported through Hungary to Ukraine via Beregdaróc. There are additional interconnectors at Mosonmagyaróvár, near the border with Austria and at Balassagyarmat on the Slovakian border.
Since 2021, the sole transmission system operator (TSO), FGSZ, has also been importing natural gas from the Drávaszerdahely interconnection point; these volumes originate from the Krk LNG terminal in neighbouring Croatia which has provided an opportunity for traders to transport global LNG cargoes to Hungary.
There are additional interconnections at Csanádpalota, bordering Romania, and at the Kiskundorozsma, bordering Serbia, with both currently being used to transport gas out of Hungary.
Gas supply routes to Hungary will be further diversified with the commissioning of a cross-border interconnection with Serbia, facilitating imports through the TurkStream pipeline.
Several additional projects could see increased flows of natural gas to both to the Hungarian market and for transit to neighbouring countries. These include a proposed interconnector between Slovenia and Hungary, the introduction of bidirectional capacity between Hungary and Austria, and a new compressor station commissioned at Csanádpalota on the Romanian border.
Hungary’s gas transmission network consists of 5 873 km of high-pressure pipelines with 400 gas delivery points. The network includes six compressor stations with a total installed capacity of 234 MW.
Natural gas net imports in Hungary, 2000-2020
OpenLNG terminals and interconnections
Since the beginning of 2021, relatively small quantities of natural gas have been imported from the Drávaszerdahely interconnection point; these volumes originate from the Krk LNG terminal in neighbouring Croatia which has provided an opportunity for traders to book capacity with a view to transporting global LNG cargoes to Hungary. In June 2020, MVM signed a 7-year deal for the import of 1 bcm/y from the Krk LNG facility, and has reportedly imported some volumes from Krk in 2021. This access to global gas markets widens Hungary’s diversification of supply sources.
Interconnections at Kiskundorozsma, bordering Serbia, and Csanádpalota, bordering Romania, have historically been used to transport natural gas out of Hungary. However, recently both have been upgraded to allow imports into Hungary. In September 2021, the Hungarian government agreed a 15-year deal in principle with Gazprom to supply 4.5 bcm of natural gas to Hungary annually, the majority of which would be supplied through the Serbian interconnection via TurkStream. A new compressor station commissioned at Csanádpalota on the Romanian border, completed in 2019, opens the possibility of Black Sea offshore gas production being transported to Hungary, however, volumes transported from Romania will depend on the future development of these offshore sources.
Several additional projects could see increased flows of natural gas to both the Hungarian market and to neighbouring markets transiting through Hungary in the near future. These include a proposed interconnector between Slovenia and Hungary beginning as early as 2025, and the introduction of bidirectional capacity between Hungary and Austria is currently under discussion.
Gas storage facilities
Hungary has five commercial storage facilities, with a total working capacity of 5.01 bcm and a maximum withdrawal capacity of 58.6 mcm/d. All allow third party access.
Hungary also holds strategic gas reserves which are maintained by the Hungarian Hydrocarbon Stockpiling Association (HUSA) at an underground storage facility in Szőreg, in southern Hungary. The facility is owned by a subsidiary of HUSA, HEXUM Natural Gas.
Network resilience
Hungary’s natural gas security benefits from the country’s well developed supply infrastructure, including robust storage capacity and diverse supply routes. Hungary’s N-1 indicator, an industry indicator used to gauge the security of natural gas supply, has been above 100% for several years; the N-1 level was calculated at 157% 1 in 2021, based on the removal of Hungary’s largest natural gas import source, the Ukraine-Hungary interconnector. However, it should be noted that although it has several alternative supply routes, a significant majority of the natural gas supplied through Hungary’s interconnectors originates in Russia, leaving the country potentially vulnerable to any reduction in Russian gas supply to central Europe.
Hungary's natural gas infrastructure, 2022
Gas emergency response policy
Organisation
The Hungarian Natural Gas Law outlines clear duties and responsibilities for the Minister for Innovation and Technology, the Hungarian Energy and Public Utility Regulatory Authority (HEA), and other key stakeholders in the event of a natural gas supply emergency.
The decision whether to release stocks or restrain demand would be made by decree by the Minister for Innovation and Technology.
If emergency stocks were to be released, the HEA would decide on the volumes and peak capacities designated for eligible suppliers. Suppliers would only be permitted to use strategic stocks to meet the demand of protected customers. HUSA would carry out the stock release to those companies with whom it has signed a sales contract; stocks may only be sold at a price that is at least equal to the average purchase price.
The degree of demand restrictions that could be imposed is assessed in advance. Each year, gas traders are obliged to report consumption data by type of consumer to the relevant distribution system operator (DSO) or to the TSO, and based on this data, the HEA approves the maximum level of demand that could be withdrawn from each customer in the event of an emergency. Once an emergency has been declared, and demand restrictions approved by the Minister for Innovation and Technology, it is the TSO that applies and monitors the demand restrictions. Priority consumers, including households, residential buildings and medical centres, would theoretically be guaranteed supplies.
Throughout the course of the emergency situation, the Minister would consult an emergency committee comprised of various stakeholders including the HEA, gas and electricity TSOs, storage operators, DSOs, traders, universal suppliers and HUSA.
Some additional demand restraint measures are also at the government’s disposal in a crisis. Among them are: reducing the opening hours and heating temperature of public buildings and removing excise tax on imported fuel oils to incentivise fuel switching away from natural gas.
In accordance with EU legislation, Hungary maintains a Preventive Action Plan and an Emergency Plan relating to natural gas security and emergency supply situations. The risk assessment is carried out by the HEA and then approved by the Minister for Innovation and Technology. Once approved, the HEA uses the risk assessment as a basis on which to prepare an updated Preventive Action Plan and Emergency Plan.
In addition to its own risk assessment, Hungary has been involved in a number of groups assessing risks to regional gas security, including potential supply disruptions from Ukraine and, in June 2021, a group assessing the risk to Trans-Balkan supply.
References
The highest daily consumption in the last 20 years was 89.5 mcm in 2005. Removing the largest import source, the Ukraine-Hungary interconnector, leaves Hungary with 140.8 mcm maximum daily import and withdrawal capacity.
The highest daily consumption in the last 20 years was 89.5 mcm in 2005. Removing the largest import source, the Ukraine-Hungary interconnector, leaves Hungary with 140.8 mcm maximum daily import and withdrawal capacity.