"Besides the temperatures slipping below minus 30 degrees, Hungary's next door neighbor, Ukraine, was in the middle of a standoff with Russia over a dispute about gas prices. At one stage, the Russian state-owned energy giant, Gazprom, cut off supplies to Ukraine after Ukraine siphoned off supplies of Russian gas that had been destined for its markets in Europe."

"The dispute damaged Russia's reputation as a reliable gas supplier to Europe. It also convinced Gazprom that it had to find new transit routes to reduce its dependence on Ukraine as the principal transit of Russian gas to Europe. In Hungary, a country reliant on Russia for over 85 percent of its gas supplies and where 90 percent of households depend on gas, the dispute forced Ferenc Gyurcsany's Socialist government to rethink its energy strategy."

"One was to increase its storage capacity with the help of Gazprom, even at a time when much of Europe was uneasy about the growing influence of Russia over their energy supplies. The other was to use these new storage facilities to become a hub in Central Europe - an ambitious goal particularly since nearby, Austria was pursuing the same aim."

"MOL won the government tender in Hungary last year to build a facility to store 1.2 billion cubic meters, or 42.4 billion cubic feet, of strategic gas reserves. "If our pipeline is missing some gas, I cannot increase the supply from domestic production," Hernadi said. "That is why storage is so important,""

"To strengthen its ties with Gazprom, MOL agreed last June to cooperate with the Russian company on the construction of a transnational pipeline as well as an underground gas storage facility in Hungary. The project would extend Gazprom's existing Blue Stream pipeline that already runs under the Black Sea from Russia to Turkey. From Turkey, the new pipeline would run up through Bulgaria, Romania, Serbia into Hungary."

""A feasibility study is under way," Hernadi said. "The idea is that MOL should have a stake in this venture.""

"MOL and Gazprom have also agreed that Russia should build a storage facility holding 10 billion cubic meters of gas."

"Alexei Miller, Gazprom's chief executive, said that the deal would allow Russia more possibilities for long-term gas deliveries to European gas markets. But the European Bank for Reconstruction and Development recently raised concern about the effects of the concentrated ownership of gas production and distribution on competition in the sector."

"Hernadi asserted
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