Hungary's MOL Offered $277 Million Loan for Gas Storage Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--The European Bank for Reconstruction and Development (EBRD) (London, United Kingdom), an international financial institution that primarily invests in private sector projects across 30 countries in Europe and Central Asia, has agreed to provide a $277 million loan to Hungary's MOL Magyar Olaj-es Gazipari NyRt (BDP:MOL) (Budapest) for the development of a natural-gas storage facility. MOL is an integrated oil and gas company engaged in the exploration, refining, production and distribution of petrochemicals.

MMBF Limited, a 72.5% subsidiary of MOL, is converting the existing Szoreg-1 reservoir in the Algyo oilfield in southern Hungary into an underground gas storage facility in an effort to secure energy supplies. Funds from EBRD's eight-year unsecured corporate loan will be used to complete the project. The total cost of the project is estimated to be about $848 million. The facility is designed to have a capacity of 1.2 billion cubic meters for strategic reserves and 700 million cubic meters for commercial use. The brownfield facility, which is 80% complete, is slated to be commissioned by January 1, 2010, for strategic purposes and by April 1, 2010, for commercial operations.

Gas constitutes nearly 40% of Hungary's total energy mix, and nearly 80% of the gas supplied is imported from Russia through pipelines passing through Ukraine. Supply was adversely affected earlier this year following a dispute between Russia and Ukraine over gas prices. The new storage facility is capable of stocking enough gas for 45 days at a peak consumption level of 20 million cubic meters per day for strategic activities and 5 million cubic meters per day for commercial purposes. Once operational, the facility will reduce Hungary's dependence on supplies from Russia and wil boost energy security in central Europe, as the facility is accessible from Serbia, Croatia, Romania and Bosnia and Herzegovina.

MOL is a part of the 3,500-kilometer Nabucco pipeline project, which aims to reduce Europe's dependence on Russia for gas imports and will provide a direct route to the European Union from the Middle East and Central Asia. Nabucco will be built by a consortium of companies that includes

OMV Aktiengesellschaft (OTC:OMVKY) (Vienna, Austria), RWE AG (OTC:RWEOY) (Essen, Germany), Bulgargaz (Sofia, Bulgaria), MOL, Transgaz (Medias, Romania), and Botas (Ankara, Turkey). The pipeline will run from Turkey to Austria via Bulgaria, Romania, and Hungary and is designed to transport 31 billion cubic meters of gas every year from 2014. In May 2009, MOL bought a 10% stake in Pearl Petroleum Company Limited, which is developing the two largest gas reserves in Kurdistan, Iraq. MOL plans to provide supplies for the Nabucco pipeline from the acquired Pearl reserves.

EBRD is committed to providing funding to the financial and corporate sectors of Hungary. The institution has been involved in 102 projects valued at $9.8 billion, generating a total business of $2.2 billion. With a total disbursement of about $2 billion, EBRD has a 90% of its Hungarian investments in the country's private sector. Some of the recent investments include a $69 million loan to UniCredit SpA's (BIT:UCG) (Milan, Italy) subsidiary in Hungary to address the ongoing global economic crisis and a $75 million loan for expansion of the country's road network. EBRD is also considering investing in the Nabucco pipeline project.

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