Publications / Hungarian Energy Market Report
REKK Hungarian Energy Market Report 2015 Q1Published: 1 of March, 2015
Potential effects of the fall in oil price on the gas based power generation | Mysteries of the allocation of capacities on the Slovak-Hungarian gas interconnector | Post-­South Stream implications for CSEE | Mecsek coal mining relaunched

Table of contents

Light at the end of the tunnel?Potential effects of the fall in oil price on the profitability of natural gas based electricity generation

Brent crude price displayed an unstoppable fall from July 2014, which was still ongoing in January 2015. The cause of the price drop was fundamental supply and demand: shale oil producers in North America produced an oversupply in oil, which was matched with dwindling global crude oil demand (notably in China). Despite the oversupply, OPEC (Saudi Arabia) was reluctant to cut its production, since they were protecting their market positions. The crude price, which was floating at 100-110 $/barrel in the first half of 2014, was traded as low as $46 /barrel in January 2015, a level that has not been seen since the financial crisis in 2008 (42 $/barrel).

Author: Péter Kotek
Mysteries of the allocation of transmission capacities of the Slovak-­Hungarian gas interconnector pipeline

The construction of the long-awaited Slovak-Hungarian gas interconnector pipeline is now completed. Although there are still technical issues to resolve, they cannot be blamed for why the commercial operation has not commenced yet. In January 2015, once set as target commercial operation date, systems users still do not know when and how the capacities will be allocated. In order to arrive at a proper understanding of this halt in the allocation of interconnector gas transmission capacities, we need a brief review of the conditions that existed at the birth of the project. After that, the principles of capacity allocation can be applied to help achieve the goals of the gas transmission pipeline.

The end of the mega­pipeline era:Post­-South Stream implications for Central and South Eastern Europe

Shortly after the sudden cancellation of South Stream, Gazprom CEO Alexey Miller announced it would be replaced by a pipeline of the same capacity (63 bcm) delivered to Turkey across the Black Sea (13 bcm to the Turkish market replacing the trans-Balkan pipeline and 50 bcm to the Turkish-Greek border for southeast European customers). Whether the subsea section follows Blue Stream or the proposed South Stream route initially is still uncertain. Gazprom has already invested $4.7 billion - mostly toward the offshore pipe and charter of the barge – of the approximately $20 billion required for the first two lines (about 30 bcm).
In concert with this major policy shift, Miller asserted that Gazprom will stop supplying gas to Europe through Ukraine in three years’ time. While this is highly unlikely because of infrastructure constraints, it reflects the steadfast determination of Russia to remove Ukraine from its gas transit seemingly at all costs, and leaves central and southeast Europe in another gas supply vacuum.

Author: Nolan Theisen
Mecsek coal mining relaunched

Last December tha Pannon Thermal Power Plant Inc. resstarted production at the open pit Pécs-Vasas coal mine. Surveys suggest that the 4.2 km2 site shelters about 3 million tons of extractable coal of which over 100 thousand tons are directly accessible based on the reopened quarry, without expanding the mine or carrying out any substantial additional investments. According to the current plans of the company, 15 thousand tons of coal will be mined annually at a discount to imported coal as a result of the low cost of production.

Author: Ákos Beöthy