The Krk LNG terminal: a practical advantage or a diplomatic message?

Enikő Bagoly

2021 opened a new chapter in Hungary's energy history in several aspects. First of all, the country managed to sign the first-ever long-term gas purchase contract with a Western partner by agreeing with Shell in buying 250 million cubic meters (mcm) of liquefied natural gas (LNG) annually for six years, with the aim of increasing this capacity up to 1 billion cubic meters annually (bcm). Besides, by agreeing to use the Krk terminal in Croatia, not only the supplier but the direction of liquefied gas supply has also widened, opening an alternative gas supply opportunity to Hungary for the first time in 70 years.

Putting the Krk LNG terminal into operation in 2021 provides a chance for reshaping the gas supply market of the region and of Hungary for the first time in decades. The importance of the Krk terminal has aroused a wide range of interests among gas market players in the region, both in terms of its practical and diplomatic value. Hungary has already announced its 250 million cubic meters (mcm) demand from the Krk terminal, as this volume seems almost insignificant in terms of the country’s gas demand. However, in the following years, the quantity purchased from there may reach 1 billion cubic meters (bcm), which will mean a significant 10% share of the import gas market in Hungary. At present, the terminal can be called a historical step forward not in terms of its results, but rather its perspective and diplomatic message value as it reduced the region’s Russian gas dependence by making the Western and Transatlantic gas supply markets[i] available.

Hungary’s Gas Supply - overall picture

In Hungary, natural gas is the most important energy source: its share among the primary energy sources exceeds 40%. Hungary’s gas import demand is currently ensured by five cross-border entry points, namely Beregdaróc (Ukraine-Hungary), Mosonmagyaróvár (Austria-Hungary), Drávaszerdahely (Croatia-Hungary), Csanádpalota (Romania-Hungary), and Balassagyarmat (Slovakia-Hungary).

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Operating cross-border gas entry and exit points in Hungary, 2021

Source: FGSZ Hungary[i]

[i] FGSZ Hungary: The development of the natural gas pipelines of Hungary. https://fgsz.hu/en/about-fgsz/company-history (01.07.2021)

[i] SZOKE, Evelin: LNG cargo set to arrive at Croatia’s Krk terminal today bringing gas to Hungary. In: CEE Energy News, 23.03.2021. https://ceenergynews.com/oil-gas/second-lng-cargo-is-set-to-arrive-at-croatias-krk-terminal-today-bringing-gas-to-hungary/ (27.06.2021)

The Krk LNG terminal: a practical advantage or a diplomatic message?

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Danube Institute