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. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  2. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  3. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  4. Stock Analysis

    6 Risks International Stocks Face in 2016

    Learn about risk factors that can influence your investment in foreign stocks and funds, and what regions are more at-risk than others.
  5. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  6. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  7. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  8. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  9. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  10. Investing News

    Tufts Economists: TPP Will Reduce U.S. GDP

    According to economists at Tufts University, the TPP agreement will destroy half a million jobs in the U.S. by 2025.
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  3. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. 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 >>
  6. 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 >>
Trading Center