The Slovakian transmission company Eustream announced Friday it had come to an understanding with its Hungarian counterpart, Orszagos Villamostavvezetek, or OVIT, to commit to the 71-mile pipeline.
The facility, it said, would connect a high-pressure system at Velke Zlievce, Slovakia, with the Hungarian transmission network in the suburbs of Budapest. It's hoped work on the project will begin in 2013 with commissioning in January 2015.
The memorandum came three days after OVIT shareholders approved spending $9.7 million on the project and to create a new company, Magyar Gaz Tranzit ZRt, to implement and license the new Slovak-Hungarian Gas Transmission Interconnection Pipeline.
The two countries needed to move forward to remain in the running for the $41 million being offered by the European Union under its Third Energy Package, which seeks to encourage the development of a series of interconnector projects as a way to lessen dependence on Russian gas supplies.
The ultimate aim is to create an integrated North-South Corridor gas pipeline system through Central Europe. Other such projects include Croatia-Hungary, which began operations last month, Hungary-Slovenia and Romania-Bulgaria, Turkey's Hurriyet Daily News reported.
Slovakia says it hopes to ensure access to natural gas delivered via a new Southern Corridor project through its connection to Hungary, such as the proposed Nabucco pipeline from Turkmenistan and Azerbaijan to Europe.
"Eustream appreciates that our previous and current Hungarian partner companies agreed on their strong cooperation on the technical aspects of the project," Eustream Chairman Andreas Rau said in a statement. "The most important for us is fluent continuity of the project in line with the agreed timetable."
Rau called the project, which will cost an estimated $164 million, "economically feasible" and touted the effort as a way to diversify European natural gas and "significantly contribute to European energy security."
Eustream said the additional cross-border capacity "will increase gas market liquidity and also improve the future security of gas supply for the Central European region."
The two countries had originally planned to build a bidirectional interconnector but that was changed to provide only one-way flow from Slovakia to Hungary. The two governments, however, still wanted to push ahead with the project, oil and gas industry trade journal ICIS Heren reported in October.
Slovakia Economy Ministry official Jan Petrovic, head of its energy department, told the publication then that only $4.2 million of the EU's $41 million contribution would be spent on the Slovak side of the border, with the remainder being spent in Hungary.
Slovakia's total contribution would be around $16 million. At its peak, the countries foresee 6.8 million cubic meters of natural gas per day moving through the interconnector, it reported.
Eustream in January also signed a letter of intent for cooperation on the development of a gas pipeline between Poland and Slovakia, which could complement a Slovakia-Hungary line.
"Studies will be coordinated so that this additional part of the North South Corridor following the Slovak-Hungarian interconnector will serve the market and the security of supply of the (Visegrad Group plus one) countries," former Eustream Chairman Antoine Jourdain said in January.
The final decision on the Poland project will be taken next year.
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