Hungary says Mol nears deal for Russian oil supply via Ukraine

Hungary said refiner Mol Nyrt. is discussing a workaround to receive crude from Russia’s Lukoil PJSC via Ukraine, possibly in the coming months, though that’s expected to result in increased transport costs.

Kyiv has sharpened sanctions against Lukoil over the invasion of Ukraine, effectively prohibiting the company from using the war-torn country as a transit route for its product. That hit Hungary and Slovakia, landlocked nations that obtained temporary exemptions from European Union energy sanctions on Russia.

Since then, Mol has secured short-term supplies. The company has been in discussions to reach a longer-term solution, Hungarian Cabinet Minister Gergely Gulyas told a government briefing on Thursday, without specifying who the talks have been with.

“Mol has a good chance to sign the necessary deals,” Gulyas said, adding that it could happen in early autumn. “In technical terms, that will mean that transport will be costlier and Mol will have to carry the risk from the Russian-Ukrainian border,” he said, without providing further details.

Under the current oil-supply deal with Lukoil that has been blocked by the Ukrainian sanctions, the Russian side is responsible for bringing the crude to Fenyeslitke, a small Hungarian settlement on the border with Ukraine.

The Ukrainian side seems ready to accept the new technical solution proposed in Budapest, Gulyas said.

Mol declined to comment and Lukoil didn’t immediately respond to requests for comment.

Cost Impact

Under the deal being discussed, costs of transport via Ukraine are expected to rise by around $1.50 a barrel due to higher security risks and related insurance, Gulyas said. 

On Wednesday, Hungarian Foreign Minister Peter Szijjarto reiterated criticism of Ukraine’s government and the EU for their handling of the issue.

Mol has also been affected by a windfall tax and other levies in Hungary, including one on profit from the Brent—Urals price difference. Gulyas said the cabinet is open to discussing changes to the latter to potentially ease Mol’s increased costs.

Gulyas said Hungary has been preparing for a worst-case scenario of a potential complete halt in crude supplies from Russia to the country since Moscow’s war in Ukraine began. 

“Thats why we have one of the largest relative crude reserves in Europe,” he added.