Table of contents

The gas crisis in January 2009 caught the attention of the public. The domestic use of gas can be broken down to three parts from demand side: residential and communal consumption, industrial consumption and consumption for electricity and heat production.

Western Europe including Germany, Spain and the Netherlands in particular, witnessed a considerable wave in gas storage construction in the recent years. Investment decisions were backed by the assumption of an increasing gas demand and the growing role of gas storage in a liberalised market environment. Today, investments aim not only to balance the traditional seasonal fluctuations of demand but also to manage peak periods in a flexible way. The domestic gas storage market, having lacked any significant investment until recently, is dominated by E.ON. This situation, however, will change in the near future due to the new gas storage capacities under construction and planned. Using basic market analysis tools, we analyse the chance for effective competition on the domestic gas storage market.

Between January 7th and 19th of this year the transit of Russian gas to Europe through the Ukraine was halted. This was the most serious European gas crisis to have happened since the start of Russian gas transmission decades earlier. The effect of the crisis was more severe in our region (and in Hungary in particular) than in the majority of the old Member States of the EU. This is due to Hungary’s dependency on Russian gas imports, which is by far higher than the European average, in addition, the lack or regional storage and interconnection capacity in the affected countries. The effect of the cut-off of gas delivery on consumers was ’fortunately’ mitigated by a significant drop in the nonhousehold gas demand implied by the economic recession. Last December’s weather, which was milder than the average resulted in an oversupply of storage capacities in the European market during the crisis. Under less favourable conditions, or if the crisis had lasted longer, a similar crisis would have affected consumers much more drastically than in January. Since the implementation of the 10 years long Russian–Ukrainian agreement, closing the January crisis, is doubtful, the affected countries have to prepare for the management of similar crises in the future. Therefore we have looked for the answer to the question, what are the key factors for successfully managing a gas crisis. For the answer we have studied the experience of ten countries of our region in the January 2009 gas crisis.

E.ON Földgáz Trade Zrt. hold its fourth yearly natural gas auction on 6 March 2009. The event is important because the natural gas sold transparently on the auction accounts for a significant proportion of the gas sold on the Hungarian free market. In our estimation, this proportion was nearly 30% in 2008, which equals 8.5% of the last year's total Hungarian natural gas consumption. DG Competition of the EU obliged E.ON to release gas as a remedy of the approval on 21 December 2005 of E.ON Ruhrgas International AG’s acquisition of MOL Földgázellátó Rt. (MOL Supply) and MOL Földgáztároló Rt. (MOL Storage) following an in-depth investigation.). Because of the fact that E.ON was a significant market player both in the Hungarian gas wholesale and storage markets and a significant actor on the electricity market, the Commission approved the merger but subject to several conditions. A key element of the conditions is the obligation of ownership unbundling of gas transmission (FGSZ owned by MOL) and the wholesale gas business units (E.ON Földgáz Trade). Our analysis focuses on recommendations to enhance liquidity.

The Act 40 of 2008 on the Supply of Natural Gas (hereinafter: the New Gas Act) was passed by Parliament on 8 June 2008. The New Gas Act introduced several - well-known - changes relative to the previous operational model, however, various details remain unelaborated upon. There are nearly a hundred sections in the Act referring to a separate legislation or governmental decree to set the detailed rules on the enforcement of the Act. The most important of these legislations is the Governmental Decree on the enforcement of the certain provisions of the New Gas Act, which was published on 3 January 2009 (Govt. Decree 19/2009 [hereinafter: the enforcement decree]), and includes the majority of the detailed rules.