Energy Crisis

SEE region readies for winter: Hungary to import gas from Turkey, Serbia in talks with Azerbaijan


Budapest (photo: Jo Stolp from Pixabay)


August 23, 2023






August 23, 2023





The energy crisis now seems to be out of the spotlight, but the news of upcoming strikes in Australia, the world’s second biggest exporter of liquefied natural gas (LNG), has quickly pushed up gas prices on the markets. Some traders expect a hike from the current EUR 40 per MWh to as much as EUR 100. The situation is highly volatile, so the best policy for everyone, including South-East Europe, is to ensure multiple supply routes for this winter, but also the coming years.

Hungary has already agreed natural gas deliveries with Ankara, in what will be the first time for Turkey to supply a European country that is not its neighbor. The agreement was signed during a recent summit in Budapest, hosted by Hungarian Prime Minister Viktor Orbán and attended by Turkish President Recep Tayyip Erdoğan, Serbia’s Aleksandar Vučić, Azerbaijan’s Ilham Aliyev, and Milorad Dodik, the president of the Republic of Srpska, one of the two political entities of Bosnia and Herzegovina.

They were all probably aware of the planned strikes at three LNG facilities in Australia. Of course, the strikes and price hikes would not affect the participants of the Budapest summit in the same way, since some of them are gas importers (Hungary, the Republic of Srpska), some are importers but also important transit countries (Turkey), while some are producers (Azerbaijan).

Europe’s gas depots are 90% full

The strikes are planned at the North West Shelf facilities, owned by Woodside Energy Group, Gorgon, and Wheatstone and operated by Chevron. The problem is that these facilities cover 10% of the global LNG demand. In 2022, Australia was the second largest exporter of LNG in the world, behind Qatar and ahead of the United States. These three countries supply 61% of LNG to the global market.

The announcement promptly raised the price of gas on the European markets by several percent. Yesterday, the futures price on the Dutch TTF exchange was EUR 43 per MWh, compared to EUR 38 just five days earlier. The forecasts are mixed – some expect the price to jump from around EUR 40 to over EUR 100, while others believe such fears are unjustified.

The hikes recalled the situation with gas prices in the last two years. In mid-2021, the price was EUR 20, but due to the disruptions caused by the COVID-19 pandemic, among other things, it had gone up to EUR 60 before the outbreak of the Russian-Ukrainian war in February 2022. After that it began to rise sharply, exceeding EUR 300 at one point, which caused numerous problems around the world. The situation stabilized at the beginning of this year, so in May the futures price was EUR 20.

If it’s any consolation, European gas storage facilities are full. A few days ago, the association Gas Infrastructure Europe announced that the goal of filling the depots to 90% was achieved on November 1, two and a half months ahead of schedule.

Hungary has reached a deal with Turkey

Turkish Minister of Energy and Natural Resources Alparslan Bayraktar has confirmed that Turkey will export natural gas to Hungary, according to Turkish newspaper Daily Sabah.

Under the natural gas agreement signed between Turkish Petroleum Pipeline Corporation (BOTAŞ) and Hungary’s MVM, Turkey will export natural gas to a European country that is not its border neighbor for the first time, Bayraktar said, adding that Turkey “continues to contribute to Europe’s energy security.”

The gas shipments from Turkey to Hungary are expected to start next year, according to a statement from BOTAŞ.

The agreement also includes cooperation on the use of Turkish LNG infrastructure and the two countries’ gas storage facilities within the framework of their common interests, according to local media.

In January, Turkey signed a deal with Bulgaria to supply up to 1.5 billion cubic meters of natural gas annually over 13 years.

Serbia is negotiating with Azerbaijan

Serbia, for its part, has been planning to import natural gas from Azerbaijan. President Aleksandar Vučić recently said that Serbia was ready for the coming winter, with sufficient energy and food reserves.

The country’s gas reserves, according to him, are “good.” Currently, they are at about 620 million cubic meters, stored in the Banatski Dvor gas depot and in Hungary.

According to him, Ukraine is blocking the transit of Russian gas to Hungary, and this could put pressure on TurkStream, which transports Russian gas through Turkey and Bulgaria to Bosnia and Herzegovina, Hungary, and Serbia.

Serbia is building an interconnector with Bulgaria, but is also negotiating with Azerbaijan on the import of around 300 or 400 million cubic meters of gas, Vučić recalled.

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