Prospects for energy industry and natural gas in Hungary

Energy industry was radically transformed after the regime change in Hungary: energy intensive industries rapidly diminished, deep coal mining virtually disappeared, and natural gas became the key energy source. The ratio of fossil fuels within the primary energy mix amounted to 80% around the regime change, which dropped only by 5% by 2009. In the past two decades, Hungary covered its natural gas import need fundamentally from eastern sources, mainly from Russia. Due to the expansion of the storage capacity in Zsana, our country now has extraordinary storage capacity at its disposal in the region.

Following the turn of the millennium, Hungarian gas production covered approximately 25% of the demand. In recent years, domestic production has been stable, around 2.5-2.6 BCM annually. Calculations suggest that the country’s confirmed exploitable gas reserves are sufficient for the following 38 years. Although there are high hopes of exploring and extracting non-conventional domestic sources, such attempts have yet proved unsuccessful.

There are several scenarios prepared to forecast Hungarian energy consumption by 2030, focusing on the growth rate of domestic nuclear and renewable energy capacities. Even if there is a large-scale, ambitious expansion in nuclear capacities and the ratio of renewable energy production is to be deliberately increased, 40% of power generation will still rely on natural gas.

The International Energy Agency analysis of 2012 revealed that forecasting Hungarian natural gas consumption is rather difficult, since both the residential and the industrial sectors have high potentials for savings (up to 1.5-2 BCM can be saved by 2030). In the same period, the propagation and the greater use of gas-fired power plants could result in a 3.5-4 BCM consumption increase.

The diversification of natural gas sources is a key objective not only for the Hungarian government’s medium- and long-term energy strategy, but also for the European Union. However, even the National Energy Strategy recognizes that natural gas imported from Russia will prevail in the Hungarian and central-eastern European regional market, while natural gas from alternative sources is expected to be taken into account as an additional, safety resource.

(Source: National Energy Strategy 2030, July 2011; International Energy Agency Oil & Gas Security / Emergency Response of IEA Countries, 2012)