Hungary has finalized a 10-year natural gas supply agreement with Shell (SHEL.US), marking a significant step in the country's efforts to reduce dependence on Russian energy. This move comes as the European Union's deadline for the Russian gas embargo approaches, signaling Hungary's formal launch of an energy supply diversification strategy.

Hungarian Foreign Minister Peter Szijjarto announced during an interview at the International Gas Technology Exhibition in Milan that the country reached the agreement on Tuesday. Starting from 2026, Hungary will receive 2 billion cubic meters of natural gas over the next decade through this deal. He added that the gas will be delivered to Hungary via pipelines through the Czech Republic and Germany.

Despite the EU's plan to completely halt imports of Russian fossil fuels by the end of 2027, Hungary has long openly opposed this initiative. Since the outbreak of the Russia-Ukraine conflict, Hungary has actually strengthened its energy cooperation with Russia. The Hungarian government has called for EU compensation for member states' efforts to break away from cheap Russian energy dependence and advance supply diversification.

Now, Hungary has begun taking concrete action to find alternatives to Russian gas. Szijjarto stated: "We are also negotiating multiple contracts with other Western suppliers, but these have not yet reached a stage where they can be publicly announced." However, he emphasized that the EU's current plan to "gradually phase out Russian energy imports" continues to pose a significant threat to Hungary's energy security. The core issue is that Hungary currently lacks sufficient pipeline infrastructure connecting to other energy markets, preventing adequate natural gas transmission capacity.

Currently, Hungary has a long-term gas supply contract with Gazprom PJSC, under which Russia supplies 4.5 billion cubic meters of natural gas annually to Hungary, with the agreement valid until 2036. Since 2022, Hungary has additionally increased its natural gas purchases from Russia beyond this existing contract.

Szijjarto noted that Hungary's nuclear energy development plan will fundamentally alleviate the country's energy supply pressure. By adding two new nuclear reactors, Hungary's nuclear power generation capacity will double. This will not only reduce the country's current natural gas imports by half but also help Hungary achieve autonomous supply for 70% of its electricity needs.

"This will completely transform our energy landscape," he said. "We expect to steadily advance the related work and strive to connect these two new nuclear reactors to the grid in the first half of the next decade."