The Hague-based energy giant Shell has signed a supply deal with Hungary to supply the nation with LNG via the upcoming Croatian Krk import terminal.
Under the deal, Hungary will buy 250 million cubic metres of gas equivalent per annum for a period of six years, Foreign Minister Peter Szijjarto said during a press conference in Budapest on Friday.
This is the first time for Hungary to enter a long-term deal with a Western energy company, according to a statement by the foreign affairs ministry.
The country has previously only imported Russian pipeline gas under long-term deals with Gazprom and its export arm.
Shell’s Global Executive Vice President István Kapitány said that natural gas could help fulfill the demand for increasing quantities of clean energy, replacing coal or other liquid fuels.
“Affordable” price and supply diversification
Hungary’s state-owned MFGK has earlier this year booked 0.67 Bcm at the Croatian facility which includes an FSRU for the period January-September 2021.
The booking also includes 1.01 Bcm/year for the subsequent years through 2027.
State-owned LNG Croatia, the Krk terminal developer, plans to officially launch the terminal on January 1, 2021. The converted Golar FSRU will arrive from China later this year while Krk onshore works are nearing completion.
Furthermore, Hungary has already completed the interconnectors with six out of its seven neighboring countries, including Croatia, Szijjarto said.
This will allow the nation to diversify its natural gas supplies but also reduce prices. According to the minister, the deal signed with Shell includes an “affordable price”.
“When we make a decision with relation to Hungary’s gas supply, we take into account two aspects: the security of supply and price,” Szijjarto said.
“Partly because of the coronavirus pandemic, and partly because of the overproduction crisis that preceded it, the price of LNG has fallen below that of piped natural gas,” he said.
Affordable LNG prices, improved interconnection, but also “depandable” relations developed with both eastern and western energy companies, would ensure Hungary’s supply security.
“This cooperation will be maintained in future in view of the fact that it is in Hungary’s interests for gas to arrive in the country from as many sources and via as many routes as possible,” Szijjarto said.