Hungarian energy group MOL (BSE: MOLB) and Ukraine’s state-owned Naftogaz have signed an MoU to develop petroleum-product storage capacity in Hungary near the Ukrainian border, a deal that has already triggered a political confrontation with Prime Minister Peter Magyar, who said the facility would not be built under his government, business online VG writes on September 21.

The MoU was signed on the sidelines of the first Carpathian Eight summit and was announced by Naftogaz acting chief Serhii Fedorenko on September 20. Naftogaz said the proposed facilities would provide additional storage for Ukraine and help diversify supply routes amid continuing Russian attacks on the country's fuel infrastructure. Kyiv is seeking to diversify its energy infrastructure and establish additional storage capacity outside the range of Russian strikes, while maintaining reliable fuel supplies to consumers. Naftogaz said the project would also support cross-border energy cooperation between the two countries.

The announcement was followed by a sharply worded reaction from Magyar in parliament, when asked by a Fidesz MP. The prime minister said he had spoken at length with MOL chairman and CEO on the phone. Zsolt Hernadi reportedly had told him that talks with Ukrainian and US partners had begun with authorisation from the previous, Orban-led government. Magyar added that his government had not been informed about the discussions.

The procedure followed by MOL was "completely unacceptable", Magyar said, and ended his remarks by saying: "What the consequences of this will be, we will see."

He also said the proposed storage facility would not be built anywhere in Hungary, while Tisza remains in power. Magyar additionally disputed the significance of the summit, saying Hungary was not a member of the Carpathian Eight and he had declined an invitation to participate.

MOL has sought to play down the significance of the agreement. It released a statement later in the day, saying the project was at the very early stages and that is likely to take several years. The company said it still needs to examine the technical conditions, financing possibilities and environmental, safety and regulatory requirements associated with any potential project.

The company added that during this preliminary stage, there had been no need to involve the Hungarian government. Any necessary consultations with authorities and decision-makers would take place once a substantive assessment begins, the statement read.

MOL added that European countries cooperate in storing strategic crude oil and other hydrocarbon reserves for one another, and that the group already stores strategic stocks belonging to both EU and non-EU countries in Hungary. The latest MoU with Naftogaz fits into this broader framework of international cooperation.

Naftogaz presented the memorandum as an agreement to develop storage facilities in Hungary, while MOL stressed that no project has yet been approved, financed or permitted and that substantial preparatory work would be required before construction could be considered, VG sums up the latest developments.

The memorandum was one of several energy agreements involving Naftogaz announced during the Carpathian Eight summit. Separately, Poland's Orlen agreed to supply Naftogaz with three LNG cargoes in early 2027 and provide up to $500mn worth of motor fuel to Ukrnafta.