Hungarian state-owned energy group MVM has secured a 5% stake in the next phase of Azerbaijan’s flagship Shah Deniz gas field, joining a $2.9bn development led by BP. The move marks a significant expansion of Hungary’s presence in the Caspian energy sector, where oil and gas company MOL is already active.

The Shah Deniz Compression (SDC) project aims to extend the life of the Caspian Sea field by tapping low-pressure gas reserves and boosting recovery.

Once operational, it is expected to deliver an additional 50bn cubic metres of gas and 25mn barrels of condensate for export. The consortium includes BP, the operator with a 29.99% share, Russia’s Lukoil, Turkey’s TPAO, Azerbaijan’s SGC, Canada’s NICO and Hungary’s MVM.

The final investment decision (FID) was announced during Baku Energy Week, underlining Azerbaijan’s strategic role in European energy diversification efforts amid ongoing pressure to reduce reliance on Russian gas.

MVM was the first Central European trader to purchase and physically deliver Azerbaijani gas to Hungary by pipeline. While the initial agreement covered short-term deliveries, MVM now views Azerbaijan as a strategic partner and is pursuing a longer-term arrangement, MVM CEEnergy CEO Gabor Orban said.

MVM CEEnergy is the leading natural gas trader in Hungary. 

He cautioned that physical constraints remain a barrier to scaling up imports from the South Caucasus. He called for a major upgrade to the Southern Gas Corridor (SGC), including doubling the capacity of the Trans-Adriatic Pipeline (TAP) from 10 to 20 bcm, and improvements to regional interconnectors between Bulgaria, Serbia and Hungary.

MVM’s entry into the project reinforces Hungary’s energy diplomacy in the region and aligns with Budapest’s strategy to broaden its natural gas supply sources.

The 5% stake held by MVM allows Hungary to benefit directly from the natural gas from the Shah Deniz field. The gas supplied through the Southern Gas Corridor could contribute to the gradual decoupling from Russian imports. Based on the size of MVM’s share in the project, Hungary could receive around 1-1.5 bcm of natural gas per year from the field.

MVM Group posted a net profit of HUF324bn (€800mn) for 2024, down from the record HUF369bn a year earlier but still one of its strongest results on record. Revenues fell from HUF5.08 trillion to HUF4.53 trillion last year as energy prices eased.