Gazprom stores some of its natural gas in Hungarian facilities

I guess it is high time to talk about Vladimir Putin and natural gas.

First, Putin’s trip to Serbia. Serbia and Russia have had close ties for more than a century. The only exception I can think of is the 1948-1954 period when Tito was considered to be the “chained dog of the imperialists.” But otherwise in all conflicts Russia stood by Serbia. Serbia’s financial situation is pretty grim at the moment, and I understand that without Russian help Belgrade would be in even greater economic and financial trouble than it is. The closeness of the two countries is demonstrated by the fact that the date of the celebration of the 70th anniversary of the liberation of Belgrade by the Red Army was moved forward to accommodate Vladimir Putin’s schedule. The military pomp on display to impress the Russian president was noteworthy, especially in view of Serbia’s insistence that she wants to become part of the European Union.

Putin decided to use this opportunity to deliver a stern message to Europe. He warned Brussels that as long as the Ukrainian crisis is not settled, naturally in favor of Russia, gas supplies to Europe might be disrupted just as happened in 2006 and 2009. He said that he himself will do everything to avoid such an eventuality, but if it does happen it will be the fault of the European leaders.

Almost at the same time news reached the West that Hungary will store Gazprom gas. You may recall that Hungary purchased the German-owned E.ON gas storage facilities in 2013 for an incredibly high price. The story of that purchase is well summarized in an article in the Budapest Beacon, according to which the Hungarian state-owned company, MVM, may have lost $2.6 billion as a result of the deal. Given the pervasive corruption in Hungary, analysts were certain that the purchase of E.ON’s business units was “a success story for certain business circles but a huge loss for the national economy as a whole.” This assessment might not be on target. It is more likely that Viktor Orbán’s eagerness to purchase E.ON at whatever price stemmed from a deal with Gazprom to use Hungarian storage facilities. Aleksey Miller, CEO of Gazprom, visited Budapest in October 2012. At that time Miller agreed to such a deal, but only if the storage facilities were in the hands of the Hungarian state. A year later Orbán obliged.

gaztarolok

So, what kinds of storage facilities are we talking about? E.ON Földgáz Storage Zrt. has five underground facilities in which it can store 3,740 million cubic meters of natural gas. According to Hungarian sources, these underground storage facilities are the best and the largest in the region and  fourth in size in Europe. As a result, in 2009 Hungarians were more or less unaffected by the gas shortage when Russia stopped the flow of gas through Ukraine to Europe.

I was pretty sure by the end of September that something was afoot concerning Russia’s use of Hungary’s storage facilities, but it was only on October 10 that I read an AFP report which noted that although Hungary is steadily buying gas from Russia, it is also storing Russian-owned gas. The article noted that “it is unusual for the company to store gas still owned by Gazprom, which is locked in a dispute with Kiev that some fear could see transit through Ukraine halted for the third time in a decade.” According to the spokesman of MVM, the owner of the facilities, “with this agreement Gazprom will be able to comply with its long-term contract obligations, should there be problems on the transport routes.”

Kyiv Post tersely noted the Russian-Hungarian deal without adding any editorial comment. But Kiev must see the deal as an antagonistic move because, with it, Russia can supply gas to Europe at the same time that it squeezes Ukraine.

As for the amount of stored gas owned by Hungary, this number is difficult to estimate. Throughout September the Hungarian media was full of complaints about Hungarian tardiness in filling the country’s storage facilities. In mid-September HVG claimed that they were only 58 percent full. Moreover, if one can believe MTI, a month later, on October 16, the situation was exactly the same. Opposition politicians naturally blame the Orbán government for its tardiness and predict terrible consequences come winter. But I suspect that something else might be behind the procrastination of the Hungarians. The Russian-Hungarian deal to store Russian gas in Hungary was signed only at the end of September, and it is very possible that in return for its “generosity” Hungary managed to get a lower price on Russian gas. I can’t think of any other rational explanation for not filling the storage facilities as quickly as possible. Especially since other European facilities are 80-90% full. Perhaps we will eventually learn the real story, although I’m sure that the Hungarian government will do its best to conceal it.

61 comments

  1. Putin told the Serbian daily “Politika” yesterday that isolating Russia was an “absurd, illusory goal” and attempts to do so would hurt Europe’s economy. Putin went on to say: “We hope our partners will realize the futility of attempts to blackmail Russia and remember what consequences discord between major nuclear powers could bring for strategic stability.”

    Let’s be clear here who is rattling the nuclear sword, it isn’t the USA or NATO, its Russia. But let’s also be clear some of us in the United States who pay attention to these things also hear the nuclear sword rattling and unfortunately many Americans will listen to the calls for significant increases in our strategic forces inclusive of a voiding of the START treaty.

    I was raised in the middle of the nuclear arms race and it had significant consequences for both the United States and Russia. Clearly it’s Putin who is trying to polarize things not President Obama and my government. Hungary can help things by making it clear that sanctions over the Russian occupation of significant parts of Ukraine are not “blackmail,” but a consequence for bad international behavior. But Orban’s repeated comments mirroring the political line of the Russians effectively support Putin’s blackmail thesis. The incipient cold war that is developing is being accelerated by Central European states like Hungary and Serbia that are publicly supporting Russia by opposing sanctions, it encourages Putin to make comments like he did yesterday.

  2. Here is the fifth Hungarian-owned facility:

    Szőreg-1: 1.9 billion m^3, including 1.2 designated “strategic”

    http://www.mmbf.hu/en/web/guest/clients/actual/capacities

    “The injection cycle in the 2014-2015 storage year starts on April 16, 2014 and will be closed on October 15, 2014, whereas the withdrawal cycle starts on October 31, 2014 and will be closed on March 31, 2015.”

  3. “E.ON Földgáz Storage Zrt. has five underground facilities in which it can store 3,740 million cubic meters of natural gas.”

    If the storage is 60% full already then the Russian gas couldn’t be more than 10-20% assuming it is impossible to sell the full remaining capacity. Meaning say 700 mcm gas. How much is that counting in European consumption? 10 days worth? 5 days worth? Or even less? Does anyone know?

  4. According to the two state-owned storage companies themselves, MVM and MFB [bank], the total Hungarian storage capacity is 6.33 billion m^3 + at least 4.17 billion m^3 of cushion gas.

    Of course, just a portion of the cushion gas can be used up without destroying the storage facility.

  5. Compare the Hungarian capacity of 6.33 in 5 facilities with the Austrian 5.69 billion m^3 in 6 facilities.

  6. # of gas storage facilities:

    0: Slovenia, Estonia, Lithuania, Finland, Belgium, Greece, Norway, 3 Caucasian republics
    1: Croatia, Slovakia, Serbia, Latvia, Sweden, Ireland, Portugal, Bulgaria, Turkey
    2: Belarus, Denmark

    5: Hungary, Netherlands, UK
    6: Austria, Czech Republic (of which 5 in Moravia)
    7: Poland
    8: Romania
    9: Italy
    10: Spain
    12: Ukraine
    15: France
    18+: Russia in Europe
    30+: Germany

  7. Sources of daily supply of gas to the European Union, 2012:

    Internal production: 20.5% to 31.6%
    Underground storage: -34.2% (injection) to 30.7%
    Russia: 21.1% to 26.9%
    Norway: 13.2% to 24.6%

    Liquid natural gas: 9.3% to 11.7%
    Algeria: 3.8% to 4.6%
    Libya: 0.7% to 1.4%

  8. Hungary was #4 in Europe in the amount of gas it can store underground or #5 in the overall storage capacity in 2012:

    Storage capacity / yearly internal demand:

    1. Serbia [?]
    1. Latvia: 1.68
    2. Slovakia: 0.56
    3. Hungary: 0.51
    4. Austria: 0.44
    4. Czech Republic: 0.33
    5. Denmark: 0.29
    6. France: 0.29
    7. Germany: 0.25

    etc.

    Here are my calculations:

    Working gas volume (WGV) of
    (underground storage facilities + LNG storage facilities) / internal demand in 2012, in TWh

    Germany: 225.1 / 909.1 = 0.25
    Italy: (173.5 + 2.2) / 792.8 = 0.22
    France: (137.0 + 5.6) / 494.8 = 0.29

    Hungary: 53.5 / 105.7 = 0.51
    UK: (52.3 + 13.9) / 841.5 = 0.08
    Austria 39.9 / 91.2 = 0.44

    Slovakia: 31.9 / 57.0 = 0.56
    Romania: 29.6 / 132.6 = 0.22
    Spain: (29.0 + 22.2) / 362.6 = 0.14
    Czech Republic: 28.6 / 86.2 = 0.33
    Latvia: 25.5 / 15.2 = 1.68
    Netherlands: (21.4 + 3.6) / 396.5 = 0.06
    Poland: 17.7 / 155.7 = 0.11

    Denmark: 11.2 / 38.6 = 0.29
    Belgium (7.5 + 2.4) / 185.7 = 0.05
    Croatia: 7.1 / 29.7 = 0.24
    Bulgaria 5.0 / 28.7 = 0.17
    Serbia: 3.3 / 0 [?]
    Ireland: 2.4 / 51.8 = 0.05
    Portugal: (2.1 + 2.6) / 49.4 = 0.10

    There was no underground storage facility in the following countries in 2012:

    Estonia: 0 / 7.1
    Finland: 0 / 38.8
    Lithuania: 0 / 34.2
    Sweden: 0 / 13.0

    Greece: (0 + 0.8) / 47.1 = 0.02
    Macedonia: 0 / 1.3

    Switzerland: 0 / 36.3
    Slovenia: 0 / 9.2
    Luxembourg: 0 / 13.6

  9. Obviously, the smaller the ratio is, the bigger the exposure of the country is to external disruptions of supply.

  10. “when Russia stopped the flow of gas through Ukraine to Europe”.
    Well, the Russians reduced the flow and then the Ukranians reversed it (as far as I remember).

  11. Daily international transmission of gas in 2012, in TWh

    from Ukraine: 0.60
    from Austria: 0.13
    from Croatia, Serbia, Romania: 0

    to Serbia: 0.14
    to Croatia: 0.08
    to Romania: 0.05
    to Austria: 0

    Maximum possible daily change of gas in the 5 underground storage facilities:

    out, “deliverability”: 0.55
    in, “injection”: 0.37

    maximum daily domestic gas production: 0.08

  12. Related info: sources of electric power of Hungary a short while ago:

    % of domestic consumption:

    Input:
    Domestic: 65.1%
    Ukraine: 17.0%
    Slovakia: 14.3%
    Austria: 6.4%
    Romania: 4.8%

    Output:
    Croatia: 7.0%
    Serbia: 0.6%

  13. Well done US (and also Norway) for standing up to the Orbanist Thuggocracy.

    Pity the UK’s new ambassador is apparently made of less sterner material- his nickname of “Neville Chamberlain” is well-deserved

  14. @D7, as a member of the EU (for now), the UK can’t ban the free movement of EU citizens in the way the USA can.

  15. to be more precise:

    the banned fideszniks are not proven kleptocrats, but they or their family members are strongly suspected in involvement in kleptocracy.

  16. % of storage capacity filled with gas on October 16, 2014:

    Ukraine: 52.4%
    Hungary: 67.1%
    Romania: n/a
    Portugal: 84.5%
    Bulgaria: 87.5%

    Croatia: 90.9%
    France: 91.3%
    Slovakia: 92.3%

    other European countries, including Germany, Italy, UK, Spain, Poland > 95%

  17. Peter Heim is an interesting guy. He was responsible for the closure (effective bankruptcy) of Hypobroker Hungary (then owned by the German Hypobank which ended being part of Hypovereinsbank and later Unicredit) back in the day. He apparently operated a mini hedge fund within the firm and bet on the wrong horse when the Russian and Asian crises hit in the late 90’s. Despite the colossal loss (in Hungarian terms) he amassed, he became quite an influential finance background man.

  18. @HiBoM, I remember that Orbán was coming here (unofficial visit) in October sometime. Szijjártó is also due around October 23. I wouldn’t like to be in his shoes.

  19. Overall the actions of my government in banning some of Orban’s supporters is a positive development. Team Obama moves very slowly, or let us say methodically. I suspect the response from Orban’s government will be something more than just calling in Mr. Goodfriend. I would suggest to the U.S. State Department that we add to its list Márton Gyöngyösi, the vice chairman of the Foreign Affairs Committee of the Hungarian National Assembly and deputy leader of Jobbik’s parliamentary group. Reason: probable Russian spy and generally irritating fascist.

  20. Correction: it takes at least another 38 days to fill the 4 former e.on storage units. I do not know the status of the MBF unit at Szoreg.

  21. If it is true that the head of the Hungarian tax authority is actually on the banned list, that would far more explosive internationally than people such as Habony. For such a prominent figure to be banned, one would feel the Americans must have proof and be prepared to disclose it.

  22. Athough he’s the closes advisor of Orban, Habony is only a little fish.The big ones are involved in energy.

  23. The “blogosphere” has a field day. By Marton Bede:

    GÁSPÁR ORBÁN DETAINED AT KAMPALA AIRPORT!!!

    Ugandan authorities tell son of Hungarian PM he is not allowed to enter the country due to international sanctions imposed on the Orbán regime.


    HUNGARY DETAINS, EXECUTES SLEEPER AGENT ANDREW G. VAJNA!!!!!!
    —-
    HUNGARIAN PM DENIED THERAPY AT AUSTRIAN MENTAL ASYLUM

  24. Dr. Janos Martonyi will straighten this out.

    I’m told he’s a committed Atlanticist.

    He will surely persuade our American allies.

  25. HiBoM,
    “@D7, as a member of the EU (for now), the UK can’t ban the free movement of EU citizens in the way the USA can.”

    I know that. I was referring to the fact that he refused to comment when pressed for his views on the Orbanist war against charities, churches and NGOs. The basic gist was that “Norway and Hungary are both friends of the UK and I don’t know enough about the case to comment…. ”

    Now, it may be behind the scenes there are stronger words being shared but the fact that he has just embarked on a national tour pushing economic cooperation with the regime’s local representatives throughout Hungary makes me skeptical.

  26. All Hungarians associated with FIDESZ, Magyar Nemzet, and many tv and radion station should be banned not only from travelling to USA but to all Western European countries.

  27. cameron and the tories dig orban. i mean what’s not to like about him? if blair had a famously great chemistry with colonel gaddaffi, then why couldn’t cameron like the lion of hungary who destroyed the commies? and the uk practically lives off of russian oligarchs so putins influence in hungary can’t be an issue, either.

    by the way i don’t think the british ever raised their voice about anything, anywhere. they fight the invisible enemies like isis or alquaeda but will never criticize a sitting government. same with the french. or with the germans. they are pretty reliable in this respect. and orban reliably uses this out. now admittedly with the norwegians and the americans he miscalculated a bit. a bit.

    if the americans have something they should show their cards, otherwise we all know that habony rented medieval masters from the museum of fine arts practically for free and lives in a subsidized apartment he receives from his pal toni rogan or that szazadveg is a money laundering operation for fidesz. i am afraid they too inform themselves form newspapers.

  28. I read the article titled “Diplomatic War: Hungarians on American black list” in Népszabadság. It stated “one of the relevant Hungarian businessman stated that he was called the American Embassy, where they told him to he was to be deprived of a permanent entry permit” I am not clear whether or not I translated this correctly, because what is called the Re-entry Permit (Form I-327), also known as Permit to Re-Enter is a travel document similar to a certificate of identity, issued by the United States Citizenship and Immigration Services to U.S. lawful permanent residents to allow them to travel abroad and return to the U.S. It is a passport-like booklet with a blue-green cover with the words “TRAVEL DOCUMENT” on the front.

    So did this travel ban effectively revoke the US Green cards from these ten individuals? Did these 10 Fidesz related businessmen have family in the USA, companies that sponsored (Form I-140, Immigrant Petition for Alien Worker), or use the Form I-526, Immigrant Petition by Alien Entrepreneur process to be granted a green card. Or is the article simply confusing and the “relevant Hungarian businessman” is an exceptional case. If any of these 10 were granted a green card based on the Immigrant Petition by Alien Entrepreneur process I think a serious investigation needs to be done of the required investments of $1,000,000, or $500,000 investment in a targeted employment area (high unemployment or rural area) to see if these too are corrupt operations run by front men.

    An entire Pandora’s box relating to these green cards assuming they were issued has been opened and where it may go could be interesting.

  29. Budapest, district 14
    Fidesz wants to annul the election of opposition candidate Karacsony.
    Let us see the numbers!

    Karacsony 18,126, 42.5% vs Fidesz 16,914, 39.7%, a margin of 1,212 votes.

    http://valasztas.hu/dyn/onk14/szavossz/hu/M01/T014/tjk.html#pjkv

    The bone of contention is precinct #13 out of 75 precincts.

    Here the opposition mayoral candidate beat Fidesz 220-180, a margin of 40.
    Fidesz disputes 10 (!) votes.

    http://valasztas.hu/dyn/onk14/szavossz/hu/M01/T014/szk013.html

    These ten votes would not change the 1200+ vote the difference for the winner, but Fidesz wants to rerun the entire election in the district.

  30. It is amazing how MSZP, DK and the rest think this is something positive for them.

    If what goodfriend said was true, then he had credible information about corruption that he decided on purpose not to share before the election.

    First he waits for his friends to get butchered in the election and have no mayors and no representation for the next 5 years. Then a week later he goes on a long press conference with his corruption accusations. Meanwhile Egyutt, the opposition party 80% financed from the US reached 1,8% on the county lists.

    Good job Goodfriend!

    When will these leftist parties and their supporters realize that the US does not care about them? They only care about defending their assets embedded in the Hungarian NGO sector. Wouldn’t it be embarrassing if under pressure they started to sing? Like the German guy started to sing when he was faced with 20 years in prison and gave up much of the US operations in Germany.

  31. DK cheated at the elections? In district XV there was a candidate only supported by DK and not the other parties. But he campaigned at every place on posters, on facebook, as if ALL opposition parties supported him.

    The DK fraud, and campaign abuse was so much that it was condemned 6-0 even the MSZP delegate voted to condemn DK.

  32. @KTP

    What you and the Fidesz people say is nonsense!

    District 15 was one of the districts where the opposition parties (except LMP and Jobbik) agreed not to run against each other.

    1.
    The municipal assembly candidates ran as
    “DK-EGYÜTT-MLP-MSZP-PM-RÁTE”

    2.
    There were NO Egyutt or PM or MLP or MSzP or RATE candidates for mayor.
    only Hajdu of DK.

    1. Hajdu DK 43.9%
    2. Fidesz 41.0%
    3. Jobbik 9.0%
    4. LMP 6.1%

    http://valasztas.hu/dyn/onk14/szavossz/hu/M01/T015/tjk.html#pjkv

    —-

    After the election, Tobias, chairman of the MSzP distanced itself from DK.

    So Fidesz simply want to re-run the election, thinking that the MSzP supporters
    are so confused now that they would not support the DK candidate at a
    repeated election in November.

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