The hunt for oil and gas to meet the rising demand for energy from the emerging economies has taken the energy industry to areas of the world that have not traditionally been explored. Hungary is one of these frontier areas, and so far the limited exploration has been disappointing.

IN PICTURES: World's Greatest Investors

Europe, in general, has started to become more interested in developing its hydrocarbon potential. This is due to the higher prices for the commodity that were seen in 2007, and because of the continent's increasing dependence on Russia for its natural gas supply. The European Union (EU) imports more than 50% of its natural gas and 30% of its oil from Russia.

Hungary - The New Exploration Hot Spot
Many Eastern Europeans nations are even more dependent due to the former status as Soviet republics or as satellite countries during the cold war. Hungary has been mentioned as an alternative source due to its physical placement in the center of Europe, and the potential of its existing hydrocarbon basins.

Exxon Mobil (NYSE:XOM) has been exploring in Hungary in association with Falcon Oil and Gas Ltd. (TSX:FO). The two companies signed a joint development agreement in April 2008 on 184,000 acres in the Mako Trough. Exxon Mobil got 67% ownership in the original agreement in return for an immediate $25 million payment, and other development obligations. MOL Group (OTCBB:MGYOY) , a local Hungarian oil and gas company is also a partner in the deal.

The Results
More than two years later, the results have been disappointing. The companies drilled the Földeák -1 well, and fracture stimulated it at three different depths to test the commercial potential of the well. After the third fracturing operation, the well was plugged and abandoned pending further study.

Zsolt Hernádi, the CEO of the MOL Group, said that developing the play may not be commercial given the "current technology and in today's market climate."

MOL Group is the largest oil and gas company in Hungary, and is focused on exploring and developing additional areas in the Pannonian Basin. The company has a goal of tripling its production to 300,000 barrels oil equivalent (BOE) per day by 2010.

The other majors are not active in Hungary. BP, Inc. (NYSE:BP) only markets aviation fuel and lubricants in the country and hasn't made public any exploration activities. Royal Dutch Shell (NYSE:RDS.A) markets fuel in the country through a chain of filling stations and also has no publicly announced exploration activities.

The Bottom Line
Although the search for oil and gas in Hungary has so far been frustrating for the exploration and production industry, the need to find supplies will continue to drive the industry toward this area and others that have not been the focus of previous focus of exploration efforts. (To learn more, see our Oil And Gas Industry Primer.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  2. Investing Basics

    Explaining Trade Liberalization

    Trade liberalization is the process of removing or reducing obstacles that impede the exchange of goods and services between nations.
  3. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  5. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  8. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  9. Professionals

    What to do During a Market Correction

    The market has what? Here's what you should consider rather than panicking.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI South Africa

    Learn more about the iShares MSCI South Africa fund, which is an NYSE-listed exchange-traded fund offered and managed by BlackRock.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Brazil, Russia, India And China ...

    An acronym for the economies of Brazil, Russia, India and China ...
  3. Optimal Currency Area

    The geographic area in which a single currency would create the ...
  4. European Sovereign Debt Crisis

    A period of time in which several European countries faced the ...
  5. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  6. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!