By Krisztina Than and Boldizsar Gyori
BUDAPEST (Reuters) - Hungarian oil group MOL expects to be able to choose between Russian or non-Russian crude for its refineries by 2026, its Chairman and Chief Executive Zsolt Hernadi told Reuters, by implementing substantial investments.
MOL owns refineries in landlocked Hungary and Slovakia, both of which are fed by the Druzhba pipeline's southern spur.
Import shipments via Druzhba were disrupted last November when a Russian rocket hit a power station in Ukraine which provided electricity for a pumping station, highlighting supply risks.
Hernadi said that MOL planned to partly finance the $500 million-$700 million in technological investments needed to diversify its Danube and Slovnaft refineries away from Urals oil from European Union funds.
"We would like to be able to freely decide at the end of 2025 about when, how much, and of which kind of oil we want to ship into which refinery ... by end-2025, early 2026," Hernadi said during an interview at MOL's new headquarters overlooking the Danube river in Budapest.
He said that last year only about 5% of Slovnaft's oil intake was non-Russian but that this will rise to about 30-35% or 2 million tonnes by the end of 2023.
Hernadi said MOL was fighting to prevent a hike in oil transit fees in Ukraine and also in Croatia.
Janaf, Croatia's oil pipeline operator, wants to raise transit fees via the Adriatic pipeline, which is MOL's alternative supply route, to four times the benchmark fee charged on the Baku Tbilisi Ceyhan (BTC) Pipeline, Hernadi said.
The BTC pipeline transports crude oil from offshore oil fields in the Caspian Sea to the Turkish coast.
Hernadi said that MOL was making short-term extensions to its Janaf contract and trying to negotiate a long-term one.
MOL had a contract with Janaf for shipments of 500,000 tonnes of crude on the Adriatic pipeline until end-March.
Janaf said in a reply to Reuters that the prices of services on its oil pipeline and storage system were defined during the negotiation process, in accordance with rules governing its services.
DRUZHBA FEE HIKE
Hernadi said a dispute over payments for the transit of Russian oil shipments via the Ukrainian section of the Druzhba pipeline seemed close to a solution.
He said MOL would pay Ukraine's pipeline operator Ukrtransnafta directly for the transit of Russian oil but there was still a dispute over a Ukrainian hike in fees.
"We will adjust the payment system," he said, adding that talks about a deal with Ukrtransnafta were in the final stages. "There are still disputes, discussions ongoing about the transit fee, as a multi-fold increase has been flagged (by Ukraine)."
Ukrtransnafta did not immediately respond to a request for comment.
Despite Hungarian windfall taxes, MOL posted a surge in full-year EBITDA to $4.7 billion last year, from $3.5 billion in 2021, partly due to hefty profits on cheap Russian oil.
This allowed MOL to raise its base dividend to 150 forints per share, and also pay an extra dividend on 2022 earnings.
"Unless we face an extra negative year then we can lastingly maintain this base dividend," Hernadi said.