Hungary’s state-owned energy giant MVM Group has signed an agreement with Azerbaijan to acquire a 5% stake in the Shah Deniz field. The transaction is expected to close in Q3.

The acquisition, a milestone for Hungary, will put the security of the country's gas supply "in a new dimension", Hungarian Foreign Affairs and Trade Peter Szijjarto said in Baku at a joint press conference with his Azerbaijani counterpart Jeyhun Bayramov.

Hungary has predominantly imported natural gas from Russia, even following Russia's invasion of Ukraine in 2022, which prompted other European countries to seek alternative energy sources. Hungary has been receiving 4.5 bcm of gas per year from Russia under a 15-year agreement signed in 2021.

Acquiring a stake in this gas field "provides us [Hungary] with protection against significant energy price fluctuations", Szijjarto said. "As Azerbaijan becomes a new player in our energy supply, this development ensures a much more stable and secure energy supply."

Shah Deniz, operated by BP, is one of the world's largest deepwater natural gas fields with annual production of 29bn cubic metres. The 5% stake would translate into an annual supply of 1.5 bcm of natural gas for Hungary.

The biggest investment in MVM's history will be covered from the company's own resources and will not burden the budget, Hungarian Energy Minister Csaba Lantos said. The agreement sets production volumes for stakeholders until 2050 and paves the way for production at new fields, too, he added.

In an announcement posted on the website of the Budapest Stock Exchange, MVM Group said it had agreed to acquire a 5% stake in the production sharing agreement for the Shah Deniz field and a 4% stake in Azerbaijan Gas Supply Company, the special purpose vehicle for the sale of the gas from the field.

Under an earlier agreement, Hungary is getting 50mn cubic metres of Azeri gas this year. Hungary is also partnering with Azerbaijan, Georgia and Romania on a project to bring energy from the Caucasus to Europe through a submarine cable.

The Southern Gas Corridor project aims to increase and diversify European energy supply by bringing gas resources from the Caspian Sea to markets in Europe.

Hungarian oil and gas company MOL was the third-biggest stakeholder in the largest offshore oil field in Azerbaijan and the value of its investments in the country had reached $2bn. Last year, MOL's production at the field was over 5mn barrels, 15% of the group-level total.

Other stakeholders in the Shah Deniz field are BP (29.99%), Lukoil (19.99%), TPAO (19%) and NICO (10%). BP is the field's operator.

The transaction aligns with EU diversification efforts, national energy strategy and MVM's growth strategy, the company said.

MVM Group is the second-largest company in Hungary and is in the top five in the region. It is present in 23 countries with more than 120 member companies, employing more than 18,000 people. It booked HUF5.1 trillion (€13bn) revenue last year, down from HUF7.6 trillion in 2022, but profits surged to HUF369bn from HUF73bn in the same period.