Shell plc (SHEL Quick QuoteSHEL - Free Report) , a British multinational oil and gas company based in London, reportedly entered into a landmark 10-year natural gas supply agreement with Hungary’s MVM CEEnergy. This move, announced yesterday, will reinforce Shell’s presence across Central and Eastern Europe, further diversifying the region's energy supply and creating a strategic counterbalance to Russian gas dependency.

Shell to Supply 200 Million Cubic Meters Annually Starting 2026

Under the terms of the newly signed agreement, Shell, the global leader in liquefied natural gas (“LNG”) trading, will deliver approximately 200 million cubic meters (“mcm”) of natural gas per year to Hungary, beginning in January 2026. This long-term contract underlines Shell’s commitment to energy security and flexibility in a region grappling with the geopolitical aftermath of Russia’s invasion of Ukraine.

This deal also represents a significant commercial achievement, as it positions Shell as a stable, long-term alternative to Russian energy suppliers. It follows a previous six-year agreement signed in 2020, under which Shell has been supplying 250 mcm of LNG annually to Hungary from 2021 to 2027, marking the country’s first substantial LNG contract with a Western energy provider.

Hungary’s Energy Strategy: Balancing Between East and West

Hungary’s energy portfolio has historically leaned heavily on Russian gas imports, unlike most European countries that have diversified or reduced such reliance post-2022. Despite this, Hungary is strategically expanding its partnerships, as evident in the growing cooperation with Shell.

Peter Szijjarto, Hungary’s foreign minister, pointed out the importance of the new agreement with Shell, referring to it as the largest and longest Western energy supply deal the country has ever made. This development represents Hungary’s careful and ongoing strategy to bring more Western energy sources into its national grid, while continuing to rely on the established Eastern supply routes.

LNG Delivered Through Croatia’s Port Krk

Natural gas deliveries from Shell are set to come via the Port of Krk in Croatia, an important LNG hub for the area. Once regasified, the fuel will be transported to the country through the Hungary-Croatia gas pipeline, a crucial piece of infrastructure that supports cross-border energy flows and reduces regional bottlenecks.

This import route reinforces the strategic importance of LNG terminals in Southeast Europe, particularly for landlocked countries like Hungary, seeking to diversify their sources amid fluctuating global supply chains and shifting geopolitical alliances.

Hungary Remains Largest EU Buyer of Russian Gas

Despite increased LNG procurement from Western partners like Shell, Hungary remains the largest purchaser of Russian gas within the European Union. The country consumes around 8 billion cubic meters of gas annually, with a considerable portion still supplied by Gazprom via the TurkStream pipeline, which runs through Bulgaria and Serbia.

According to Szijjarto, Hungary imported approximately 5 billion cubic meters of gas via TurkStream by the end of August this year. This figure is expected to reach a record high by the year’s end, further illustrating Hungary's continued reliance on Russian energy amid infrastructural limitations.

Infrastructure Gaps Limit Complete Transition Away From Russian Gas

Despite its growing alignment with Western energy suppliers, Hungary acknowledges the constraints of its existing infrastructure. "Are we going to be able to live without Russian gas? No," stated Szijjarto, citing geographical and infrastructural limitations as barriers to full energy independence.

Until Hungary develops enhanced gas interconnectors, storage capacities and import routes, Russian gas will remain an essential part of its supply mix. This reality underscores the importance of long-term, diversified contracts like the one with Shell, which offers both security and leverage.

EU Energy Politics: Hungary and Slovakia Resist Brussels

Hungary, along with Slovakia, has openly rejected European Commission proposals aimed at phasing out Russian energy imports. This stance has intensified tensions with Brussels, highlighting the growing divide within the European Union over energy policy and foreign relations.

The government of Hungary has maintained that energy decisions must be rooted in national interest and pragmatism, rather than ideological alignment. The new Shell deal fits this narrative, balancing between reinforcing Western ties while retaining energy ties with the East.

Hungary’s Regional Energy Dynamics and Cross-Border Flow

In addition to imports from Shell and Gazprom, Hungary sources gas through multiple regional pipelines. The country receives Romanian gas, smaller volumes via the Austrian HAG pipeline, and exports gas to Slovakia using a newly built interconnector.

These regional flows enhance flexibility and resilience, yet they are still insufficient to fully displace Russian supply. The development of new LNG infrastructure, upgraded interconnections and strategic partnerships like the Shell deal are crucial steps toward rebalancing this equation.

Shell’s Long-Term Strategy in Central and Eastern Europe

For Shell, this deal represents more than a commercial contract. This is part of a broader strategy to cement its footprint in emerging European energy markets. With the worldwide increase in LNG demand, particularly in areas seeking alternatives to conventional pipeline supplies, Shell’s versatile LNG offerings deliver exceptional adaptability and the ability to scale efficiently.

By securing long-term agreements in strategic locations like Hungary, Shell is reinforcing its dominance in the global LNG market while offering energy security solutions to politically and economically sensitive regions.

Conclusion: A Deal of Strategic Significance

The 10-year agreement between Shell and Hungary’s MVM CEEnergy is more than just a long-term gas supply deal, it is a clear sign of how Europe’s energy priorities are shifting. Countries like Hungary are working to reduce their reliance on a single source and build a more secure and flexible energy system. In today’s unpredictable world, that kind of resilience matters. For Hungary, this deal is about having more choices when it counts. For Shell, it is part of a bigger push to play a key role in the region’s energy future.

SHEL's Zacks Rank & Key Picks

Currently, SHEL has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Repsol (REPYY Quick QuoteREPYY - Free Report) , Par Pacific Holdings, Inc. (PARR Quick QuotePARR - Free Report) and Vitesse Energy, Inc. (VTS Quick QuoteVTS - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Repsol is a global energy company known for its integrated operations spanning exploration, production, refining and marketing of oil and gas. It actively pursues innovation and sustainability initiatives to transition toward cleaner energy solutions while maintaining a strong presence in key international markets. Repsol is valued at $19.66 billion. 

Par Pacific Holdings is an energy and infrastructure company with operations in the Pacific Northwest, the Rockies and Hawaii. The company's business is organized into three segments: refining, logistics and retail. Par Pacific is valued at $1.7 billion.

Vitesse Energy specializes in providing fluid transfer and control products for the energy sector, offering innovative solutions to optimize performance and reliability. The company serves a diverse customer base in oil and gas, industrial and renewable energy markets. Vitesse Energy is valued at $990.44 million.