Hungary to buy 400 million cubic meters of French LNG annually, FM announces

Hungary has signed the most long-term contract in its history for the acquisition of liquefied natural gas (LNG) with France's ENGIE, Foreign Minister Péter Szijjártó announced on Thursday. Under the agreement between MVM CEEnergy and ENGIE Energy Marketing Singapore, between 2028 and 2038, Hungary will be purchasing 400 million cubic meters of LNG per year from the French energy company, totaling four billion cubic meters over a period of ten years.

Although 400 million cubic meters per year is not an exceptionally large amount, it is not insignificant either. There have been years when the total Hungarian consumption has been as low as 8 billion cubic meters, which makes this around 5 percent of that. It will be interesting to see which of the nearby LNG terminals will be used to receive the LNG, as Hungary has so far mainly used the Croatian port of Omišalj, but there are also German, Polish, and Greek ports within a reasonable distance in the region.

The global LNG market is currently undergoing significant developments in terms of supply, and the best data on the market can probably be found on the website of the LNG Importers Association. The biggest buyers in this market are Southeast Asian countries (South Korea, China, Japan, Taiwan) as well as some Western European countries. The biggest exporters are Australia, Qatar, and the United States, but several lesser-known players are also making significant inroads (Malaysia, Nigeria, Indonesia, Trinidad and Tobago), while Russia, which is being pushed out of Western European pipeline gas supplies, is also becoming an increasingly important player in the LNG market.

The news of the deal is welcome because, according to those familiar with the market, now is a good time to secure supplies at a favorable price. After 2030, demand is expected to grow faster again, driven by factors such as an explosive increase in purchases by India.

The Hungarian acquisition is made more interesting by another important Western gas deal announced by Szijjártó a few weeks ago: then, Hungary and Shell signed a strategic contract with the help of MVM CEEnergy. At the time, experts interviewed by Telex said that the announcement should not be overestimated, as it only concerned 200 million cubic meters per year, but given the widespread criticism of the Hungarian government's slowness in reducing its energy dependence on Russia, every step that contributes to reducing this dependence is important.

The issue of energy supply is so important to the Hungarian government that it will even be addressed in the forthcoming national consultation. Last week, Prime Minister Viktor Orbán spoke on the phone with US President Donald Trump, asking him not to hold the Hungarian leadership accountable for its unpraralleled dependence on Russian crude oil and natural gas, which is unique within the Western alliance system. The US president appeared patient on the issue, but it is clear that the US government is keen to promote American LNG.

Somewhat later, at a government press briefing, Minister of the Prime Minister's Office, Gergely Gulyás cited an IMF report when defending the position that it would be too costly and dangerous for Hungary to move away from buying Russian gas. However, the figures he cited did not support this, and the IMF itself had communicated its research findings in a misleading way. The fund had in fact suggested that completely cutting off Russian gas supplies in two years' time would indeed be painful, but not in the way Gulyás presented it.

However, according to the experts who spoke to Telex, decoupling from Russian natural gas and crude oil would not be nearly as complicated and costly as the Hungarian government has claimed. It would require political will and settling relationships with actors with whom the Hungarian government is currently not on good terms and, for political reasons, may not even want to be on good terms with. If, however, the country is later forced to divest itself of Russian energy, the risks and costs would be much greater than if Hungary were to begin this process of its own accord now. In any case, the situation with regard to natural gas is more fortunate than that with oil, in that we have gas pipelines towards six neighboring countries, while there are only two oil pipelines in operation.