The EBRD provides €200 million loan for strategic gas storage in Hungary

By Anthony Williams
@ebrdtony

The EBRD provides €200 million loan for strategic gas storage in Hungary

The EBRD is stepping up the pace of energy security investments with a new transaction in Hungary. A new EBRD loan will finance an underground gas storage facility in the south of the country that will help protect Hungarians against future energy shocks.

Interruptions to gas supplies in January 2009 that left millions of east Europeans freezing in sub-zero temperatures and prompted industrial stoppages have catapulted energy security projects high up the EBRD's investment agenda.

The Bank has just completed a second transaction in what should be a series of projects to help make sure that the people of central and south-eastern Europe and the Balkans are better protected in future against the sort of energy shocks that cost lives this year.

A €200 million loan to Hungarian energy group MOL will be used to provide financing for an underground gas storage facility that has been forged out of a reservoir in the Algyo oil fields in southern Hungary.

Growing demand

The facility will provide additional gas supply capacity that can be quickly mobilised in the case of another winter emergency in Hungary and neighbouring countries. As for Hungary, it is already especially dependent on gas as a source of energy and demand is continuing to grow.

“Improving energy security is a core task on the EBRD agenda,” says Riccardo Puliti, Business Director for Energy. “This project will boost Hungary’s energy independence and will make central Europe better equipped to address any future shortages of gas supply. “It will also lead to further liberalisation and increased competitiveness on the Hungarian energy market,” adds Mr Puliti.

Scheduled to be operational by 1 January 2010, just as the worst of the winter weather is approaching, the new facility will be able to ensure a continuous supply of gas for at least 45 days during a period of peak consumption.

Boosting competition

“Hungary has a very high dependency on gas but until now did not have a designated strategic storage,” says EBRD Senior Banker Natalia Lacorzana, who supervised the deal. “The recent gas shortages highlighted the need to do something about this. The new facility will also be used for commercial storage, which will boost competition in this sector in Hungary.”

The MOL deal follows a €70 million investment in May 2009 to finance the acquisition of a gas storage facility in Croatia by Plinacro, the company that runs the country’s gas transmission services. The EBRD plans to build on these investments and the Natural Resources team is looking at similar projects, especially in those countries most severely affected in January, including Serbia, Moldova and Bulgaria.

The Bank’s financial support for these moves to boost energy security in eastern Europe complements the Sustainable Energy Initiative, a major portion of which is to improve security via energy efficiency and development of renewables.

The Bank has triggered spending of over €14 billion over the last three years in helping countries reduce their dependence on energy imports from a very restricted number of gas suppliers, both by cutting back on energy wastage but also by building up new domestic supplies of sustainable energy.

Energy wastage, a legacy of communist times, remains endemic and the potential for boosting efficiency is huge. The EBRD has invested heavily in energy efficiency projects both in small enterprises and large conglomerates, as well as in municipalities and is also increasing spending to seek out new sources of clean and sustainable energy.