Hungary, Slovakia Strike Refined Products Pipeline Deal to Help Stabilize Supply

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Written by Eric Funderburk for IIR News Intelligence (Sugar Land, Texas)

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Summary

Plagued by petroleum shortages caused by the shutdown of the Druzhba oil pipeline in Ukraine, Hungary and Slovakia have given the green light for the construction of a refined products pipeline between the two countries.

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Outliers

Slovakia and Hungary, in contrast to the other members of the 27-state European Union (EU), are the only two EU countries that continue to receive Russian oil via pipeline. The two countries were exempted from the pipeline ban for the simple fact that they had few, if any, easy alternatives to receiving Russian oil. Much of that Russian oil has flowed through Ukraine to the two countries via the Druzhba oil pipeline.

But that supply has been nil since late January, when a portion of the pipeline in Ukraine was damaged by a Russian drone attack. Since that time, Hungary and Slovakia have accused Ukraine of dragging its heels on the pipeline repair, prompting Hungary to be the dissenting voice for a 90 billion-euro (US$103.7 billion) loan from the EU meant to support Ukraine in its war efforts, holding up the funds.

Earlier, this week, the EU attempted to resolve the dispute and initiate the loan (which Hungary had previously approved along with all other members) by offering technical support and funding for the pipeline repairs in Ukraine. The offer was put on the table Tuesday, but as of Thursday, the bloc had remained unsuccessful on lifting Hungarian Prime Minister Viktor Orbán's veto on the loan, and Hungary is now obstructing further Ukraine funding from the bloc.

Increased Stability

While a recent decision between Hungary and Slovakia won't bring new crude oil into the two countries, it should help ease some of the volatile supply and demand bumps for petroleum products. Earlier this week, Hungary and Slovakia gave the final green light for the construction of a 127-kilometer (79-mile) pipeline to carry products such as petrol (gasoline) and diesel between the countries.

The pipeline will link the 160,000-barrel-per-day (BBL/d) Százhalombatta refinery in Hungary with Slovakia's 115,000-BBL/d Slovnaft refinery in capital city Bratislava, both owned by Hungary's MOL Group.

The pipeline will be capable of carrying up to 1.5 million tonnes of product and is expected to begin operating in the first half of 2027, according to the countries' ministries.

Subscribers to Industrial Info's Global Market Intelligence (GMI) Pipelines Project Database can learn more by viewing the project report.

In the Meantime...

While Hungary and Slovakia have made an initial move in bringing a bit of flexibility into the region's petroleum sourcing and supplies, further decisions are in order as the EU readies to initiate a complete ban of Russian oil imports for the entire bloc. According to EU officials and documents seen by Reuters, the proposal is scheduled for submission April 15, three days after Hungary's national elections, in order to help minimize the issue in the country's political process.

Since the late-January shutdown, Slovakia and Hungary have sourced much of their crude oil from the Adria Pipeline, which runs from the Omisalj terminal on Croatia's Adriatic coast directly to Hungary's Százhalombatta refinery.

While the pipeline route has helped ease some of the oil shortages, both Slovakia and Hungary have been drawing on strategic oil reserves to ease the supply crunch. For the Adria Pipeline to be a consistently reliable supplier to both countries, extensive expansion work would be required, which both countries so far have deemed too costly to implement. However, with a total EU ban on Russian oil looming on the not-too-distant horizon, the terminal and pipeline may see some expansions to be larger supply system to the region. The terminal and pipeline already are key suppliers of non-Russian oil to EU members Slovakia, Hungary and Croatia, as well as non-EU Bosnia and Herzegovina and Serbia, according to the Institute of Central Europe.

Key Takeaways

• Slovakia and Hungary have signed off on the construction of a 127-kilometer refined products pipeline between the two countries.
• Both Hungary and Slovakia were receiving Russian oil via the Druzhba Pipeline until a Russian drone attack damaged a Ukraine portion of the pipeline in late January.
• Since that time, both countries have used oil from strategic reserves to help cover the shortfall and sourced non-Russian oil from the Adria Pipeline, which connects Croatia and Hungary.

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About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).