Russia ready to supply crude to Serbia via new Hungarian pipeline

Russia is ready to supply crude along a new pipeline between Serbia and Hungary, due for completion in 2027, if it is necessary and competitive, Russia's Deputy Prime Minister Alexander Novak said on June 19 at the St. Petersburg International Economic Forum.

Serbia and Hungary are working to fast-track a new pipeline that could provide a route for Russian crude to flow to Serbia's Pancevo refinery and eliminate its dependence on Croatian infrastructure for imports.

The 96,000 b/d Pancevo is the only refinery in Serbia. It relies entirely on its Adria pipeline to the Croatian port of Omisalj for its crude, which once fed it mostly with Russia's heavy Urals crude. However, it was forced to eliminate its seaborne Russian oil imports after December 2022, when they were sanctioned by the EU.

Existing EU sanctions leave countries free to continue direct pipeline imports of Russian crude, though the European Commission has proposed a full phaseout by 2027.

Speaking at the forum, Novak expressed support for the new pipeline project, which would run from Szazhalombatta in Hungary to the Serbian refinery in Novi Sad.

The link would mark "an important project which will allow for the diversification of deliveries for Serbia," Novak said, adding that Russia will be ready to feed the pipeline link if it is economic for Serbia.

Plans for the pipeline have become a focus for Serbia since Russian interests in its refinery became subject to US sanctions in January. The new legislation targeted Russian energy giant Gazprom Neft and companies in which it held at least a 50% stake, making Pancevo refinery owner NIS non-compliant.

After a series of extensions, Serbia now faces a June 27 deadline before the sanctions are imposed, risking crude supply disruptions if NIS is unable to make payments to the Croatian pipeline operator that feeds the site.

Responding to the impending US crackdown, Serbia and Hungary approved a feasibility study for the new 4 million-5 million mt/year pipeline in April, but plans have yet to receive a final investment decision.

MOL rejects Russian phaseout

The oil pipeline would be jointly developed by Hungary's integrated energy company MOL, which receives Russian crude from the Druzhba pipeline system, and Serbian pipeline operator Transnafta.

As one of the last European refiners still processing Russian crude, MOL has faced growing pressure from US policymakers to diversify its energy supply. However, the company has avoided making a firm commitment to exclude Russian oil from its operations.

The company is working to make its two inland refineries, Danube and Bratislava, capable of operating without Russian oil by 2026, but has stressed that it needs the independence to use both its Adria and Druzhba pipeline connections.

According to figures from Croatian pipeline operator Janaf, the country contracted non-Russian crude deliveries to MOL's Slovakian and Hungarian refineries represent just 15% of their combined nameplate capacity. MOL has blamed high pipeline fees from Janaf for capping volumes.

Also at the St. Petersburg forum, Szijjártó reiterated his stance that Hungary needs to continue receiving supplies via the Druzhba pipeline system to guarantee its energy security.

"Currently there are two pipelines of oil leading to Hungary - Druzhba from Russia and Janaf from Croatia," he said, stressing the importance of keeping both connections operating.