Hungary to ban energy exports

Hungary has declared a state of emergency in the energy sector and presented seven measures. The package includes a ban on the export of energy, an increase in domestic production of natural gas and coal and an increase in prices of electricity and gas for the one-quarter of households that consume the most.

The ban on the export of energy could trigger a dispute between European Union member states as the Brussels administration insists on solidarity regarding the supply of natural gas. Neighbouring countries are closely monitoring the developments. Among them is Serbia, which has a deal to store gas in Hungary and needs electricity imports next winter.

The state of emergency was announced by Gergely Gulyás, Prime Minister Viktor Orbán’s chief of staff. He stated that the war in Ukraine and EU sanctions against Russia have prompted a dramatic increase in energy prices across Europe, triggering an energy crisis.

Gulyás said there is an excellent possibility that Europe would not have enough natural gas for the heating season, adding that the Hungarian plan comes into effect on August 1.

The gas in storage can currently cover consumption for three months

Hungary will increase domestic gas production from 1.5 billion to two billion cubic meters per year. Minister of Foreign Affairs and Trade Péter Szijjártó is authorised to procure additional import quantities. As officially announced, the gas in storage facilities is sufficient for three months of consumption.

Hungary’s storage facilities, with a total capacity of 6.33 billion cubic meters, are 44% full, with 2.74 billion cubic meters. It is the lowest amount in the last four years on a seasonal basis, well below the 4.5 billion measured a year ago and 5.4 billion cubic meters a year before that.

According to the 15-year contract with Gazprom, which was signed last year, Hungary receives 3.5 billion cubic meters of gas annually through the Turkish Stream pipeline via Bulgaria and Serbia, and another one billion via Austria. Gas secures 85% of Hungary’s heating needs while overall the country imports 65% of its oil and 85% of gas from Russia.

The gas ban could cause disputes in the EU

The security of gas supply in the EU, as reported by Euractiv, is defined by a 2017 regulation that prioritizes vulnerable consumers, households and small businesses. It obligated member states to have solidarity for fellow EU countries. Solidarity should be formalized through bilateral agreements, which are few.

In May, Serbia agreed with Hungary to store 500 million cubic meters of gas in its storage facilities for use during the winter. According to the first assessment of Hungary’s crisis package, the export of gas rented storage slots would be exempted from the ban.

For Serbia, it is also important to have the possibility to import electricity, because domestic production won’t be able to cover consumption.

Consumption above average to be calculated in market prices

The Government of Hungary intends to increase coal production as much as possible, activate the Matra thermal power plant as soon as it can and extend the lifespan of the Paks nuclear power plant.

Gulyás said that limiting electricity and gas prices for all households simply isn’t possible amid a war-induced energy crisis. Subsidized prices will therefore be maintained only up to the average consumption, set at 210 kilowatt-hours (kWh) of electricity and 1,700 cubic meters of gas per month.

Households with higher consumption will have to pay market prices for everything spent above the limit, he added.

Current prices for households in Hungary are currently at 20% of market prices.