Chronological History

Introduction

The Hungarian Oil & Gas Company Plc (MOL Rt.) was founded in 1991, and that alone represents a milestone in the history of the Hungarian petroleum industry. It is not only a company that embraces the entire Hungarian petroleum industry, but one that has grown into one of the largest multinational corporations in Central Europe.

Please visit the Hungarian Petroleum Industry Museum website (http://www.olajmuzeum.hu/en/alt.htm), where you will find more details on this topic, using the links offered by the various sections that focus on major milestones and significant events:

Mankind has come a long way

Ancient origins, modern innovation

Mankind has known about hydrocarbons, appearing on the earth’s surface in the form of accumulations, since very ancient times. However, it was only thousands of years later that these minerals were systematically utilised. Industrial-scale production and consumption of crude oil, including its processing into a variety of products, only emerged in the 19th century.

The oil lamp

Use of this revolutionary means of illumination spread swiftly throughout the world and required huge quantities of distilled crude oil. Demand grew fast as early as 1860.

please visit MOIM website where you can view internet exhibitions and documents entitled: „Fire and warmth (illumination and heating in Hungary in the 19th and 20th centuries

 

The internal combustion engine (ICE)

This pioneering invention has played a critical role in the history of hydrocarbon production, processing and consumption. Widespread adoption of ICS’s significantly increased demand for motor gasoline, gas oil, lubricants and greases - a challenge the emerging refining sector had to meet.

please visit the MOIM website where you can view internet exhibitions and documents entitled: „Mineral oil products and trade in Hungary in the 19th and 20th centuries

Developments in Hungary’s refining industry

Up to the 1880’s, developments in the Hungarian petroleum industry faced the same difficulties as the national economy as a whole. Lack of capital, the main bottleneck hampering crude oil production, forced Hungary to import. However, the processing sector was able to develop using feedstock (crude oil) imported from Romania, Galicia and Russia.

Establishment of the first refinery

The first major refinery was constructed at Fiume, in 1882 (today “Rijeka”, in Croatia), and the Hungarian Petroleum Co. Plc. was founded in Budapest a year later.

After 1882, Hungary’s oil refining sector steadily developed, with 13 operating crude oil processing sites by 1898. Just before World War I, 12 plants alone were producing nearly 80% of total national production, i.e. 560,000 tons per annum.

The first domestic refineries

  • Hungarian Petroleum Co started operations, in Budapest, in 1884, the Budapest Mineral Oil Plant in 1891, and the Hungarian Crude Oil Refinery Co in 1906.
  • The Crude Oil Refinery at Almásfüzítő was another major oil installation, constructed by Socony-Vacuum Oil Co. (New York) in 1907.
  • After World War I, only a few refineries remained in the territory of Hungary as newly-defined by the Treaty of Trianon, and these were merged under the name Fanto Works Co. in 1924 (renamed in 1933 the Fanto United Hungarian Mineral Oil Plants Co.)
  • Béla Bartha founded the Nyírbogdány Petroleum Plant Co. in 1922, replacing a small unit which had been in operation there for 18 years.
  • Between 1929 and 1930, Shell Oil (Anglo-Dutch) constructed a state-of-the-art refinery at the port of Csepel, with a capacity as high as 130,000 tons per annum.
  • The Szőreg petroleum plant was built in 1931 to supply oil products to the South Hungary region.
  • In 1937, another plant was completed at Pétfürdő, financed by the State of Hungary, and a state-owned plant with significant refining capacity was commissioned at Szőny, under the name Hungarian Oil Works Co. (MOIL), thus completing the final structure of the refinery sector, which then remained unchanged until 1944.

 

The dynamic trend in development prevailing before World War I came to a halt in 1913, the refinery sector also suffering a decline. At the time, 28 petroleum plants were in operation. As a consequence of losing the war, and the resulting Treaty of Trianon, some oil refineries found themselves beyond the newly-defined Hungarian borders. In Hungary itself, in 1921, there were only 6 refineries in operation, but the number and capacity of such plants steadily increased up to 1930.

In the first third of the 20th century, Hungarian refining capacity was over-sized in relation to consumption levels. Since there was no crude oil production in Hungary then, all feedstock had to come through imports. The oil processing industry could only begin real development when Hungary joined the group of oil producing countries.

Hungary becomes a crude oil producing country

The first investors from abroad

In 1911, Hungarian law first permitted foreign investors to invest in, and acquire licenses for, the exploration and production of hydrocarbons, for the first time, thus joining domestic entrepreneurs. An Anglo-Persian Oil Co. (GB) subsidiary was the first company to seize this opportunity, starting exploration in the Mura river and Izaszacsal area. During World War I, Deutsche Bank also acquired a license for natural gas exploration and production in the Transylvanian Basin.

Difficulties after the Treaty of Trianon

The Treaty of Trianon caused enormous losses to crude oil and natural gas production and although sites were discovered beyond the new national borders, no areas in Hungary had been identified as zones for potential crude oil production. In this situation, the capital-short national economy had to base its plans primarily on international capital. In 1920, the Anglo-Persian Oil Co. acquired concession licenses for a 60,000 square kilometre exploration block, but in 1927, it relinquished it, since its subsidiary, the Hungarian Oil Syndicate Limited, had had several years of unsuccessful exploration.

State-run exploration efforts

Hungarian state crude oil exploration efforts were successful as early as the 1930’s. In 1937, after intensive geological exploration efforts, commercially recoverable crude oil reservoirs were discovered in the Bükkszék region. At the same time the State was conducting unsuccessful exploration efforts in the Hungarian Lowlands.

Anglo-American capital invested in exploration

In 1931, British and American contractors established the European Gas & Electric Company (EUROGASCO), and started negotiations with the Hungarian Government. The company wanted to acquire oil and gas concessions in Central European oil-poor countries and to build hydroelectric and gas-fired power generation plants. Under an agreement, signed in 1933, the Hungarian State transferred its rights to mineral oil and natural gas exploration to EUROGASCO for an area situated west of the Danube. The company, applying state-of-the-art scientific methods and technology, then started exploration operations in September 1933, drilling its first wildcat wells in 1934.

Promising results

The first well, drilled at Mihályi in the County of Sopron, produced high-pressure and relative high purity carbon dioxide gas. (Picture: carbon dioxide gas venting off from the Mihályi-1. well)

Other drillings, however, were not successful for some time. The first successful one was drilled in the County of Zala, near the village of Budafapuszta, in 1936, and revealed commercially recoverable reserves, proving that it was worthwhile drilling exploration wells in Hungary. Based on these promising results, the company drilled a second well, „Budafapuszta-2.”.

Re-starting oil production in Hungary

Based on these results, the Hungarian-American Oil Company (MAORT) was founded in 1938, with Standard Oil of New Jersey holding more than 90% of the company. Hungary had once again become an oil producing country through MAORT operations. 1939 oil production met 90% of the country’s needs, while 1940 production in fully satisfied them.

Impact of the war years

Dynamic developments in the oil industry

World War II also affected the oil industry - production had to be stepped-up, with changes in quality at the same time. The oil industry at this time was the most dynamic of all industry sectors. By 1943, crude oil processing capacity had almost tripled, versus 1930, to over 800.000 tons per annum, and 14 plants were involved in refining operations.

In 1943, Hungary’s total crude oil production amounted to 837,711 tons, all produced by MAORT crude oil production facilities located in the County of Zala.

This was also the year in which the Hungarian Oil Works Co. opened a site at Szőny. The number of companies engaged in hydrocarbon production, and the capital employed in the sector, increased as a result of the foundation of MANÁT (Hungarian-German Mineral Oil Works Co.), MOLÁRT (Hungarian-Italian Mineral Oil Co.) and ONÁRT (Italian-German Mura Region Mineral Oil Co.).

Successful MAORT operations

When EUROGASCO drilled the Budafapusztai 2 well, it provided Hungary with the chance to guarantee supplies to meet ever-increasing crude oil demand, from its own resources. From the very beginning, the focus of attention had always been on MAORT operations. Due to the amount of share capital employed, and its dynamic corporate and business development, it swiftly became one of the largest corporations in the country. By 1941/42, MAORT had defined its full and final organisational structure in Hungary. (Map diagram: sites and locations of MAORT operations)

The status of sites, as of 20th December, 1941, reported by the state register was:

  • Bázakerettye Branch
  • Lovászi Branch
  • Lendvaújfalu Field
  • Hahót Exploration well 5
  • Oil Transportation Pipeline Lovászi-Kerettye-Budapest
  • Újudvar, Kápolnásnyék and Soroksár Loading stations
  • Mihályi-1deep well with dry ice plant
  • Inke1deep well
  • Geological and geophysical exploration operations in the concession block.

British and American companies during World War II

Since Hungary was at war with Great Britain and the United States, their interests in Hungary encountered serious problems. In December 1941, the Hungarian State confiscated Shell Crude Oil’s plants, as well as those of Vacuum Oil Co. and MAORT, and they were placed under direct control of the Hungarian war directorate.

Reconstruction – excessive production – nationalisation

Damages caused by World War II

The Hungarian crude oil industry suffered significant damage during the concluding phases of World War II. Reconstruction was launched immediately after fighting ended. Under the armistice, and the Potsdam peace treaty, concluded between the Allied Forces and Hungary, MANÁT (formerly a German property) was transferred to Soviet Union ownership

Joint Hungarian-Soviet ventures

The Hungarian-Soviet Crude Oil Co. (MASZOVOL) was founded in 1946, and started drilling exploration wells in blocks previously owned by MANÁT and the State of Hungary. The first Hungarian-Soviet joint venture well (50%/50%) was drilled in the Hungarian Lowlands near Berekböszörmény, the second at Biharnagybajom.

MASZOVOL only enjoyed a fairly short period of operations, but, in 1949, was able to discover a natural gas field, near the village of Kaba, in addition to minor crude oil reserves at Körösszegapát and Biharnagybajom. (Picture: wells drilled by MASZOVOL)

Although MAORT’s legal status was once again established in 1945, certain factors emerged that hindered trouble-free operations. These included rapidly rising inflation, Soviet army orders for unreasonable and dangerous increases in production levels, artificially low oil prices, and unproductive relationships between individual civil servants and the company.

Declining crude oil production

Crude oil production declined during the post-war period due for several reasons including the enforced and excessive production in the Zala fields which caused a natural drop in recovery ratios, difficulty in striving to create a rational production programme, and financial problems surrounding MAORT. This situation was very harmful indeed to the national economy, and resulted in major conflicts between the Hungarian State and MAORT. The political leadership thought the situation could only be resolved through nationalisation.

Trumped-up lawsuit to support nationalisation

In August 1948, certain MAORT senior managers were arrested on charges of industrial sabotage. Business management of the company was taken over by the State in September, and in December 1949 nationalisation took place. In 1948, the infamous MAORT lawsuit, based on trumped-up and specious charges, took place and its detrimental effect caused serious damage to the whole of Hungarian industry, for quite long time thereafter. (Picture: Dr. Papp Simon in front of the court, demonstration when MAORT was nationalised)

details on the MAORT lawsuit www.oilmuzeum.hu

In 1949, following nationalisation, five national oil companies were formed from MAORT units, under the control of the Transdanubian Mineral Oil Centre. In October 1952, these companies were merged into the Hungarian-Soviet Oil Co. (MASZOIL). MASZOIL, as a single Hungarian-Soviet joint venture (50-50%) constituted the entire Hungarian oil industry until 1954.

Exploration efforts were accelerated and the first positive result was when, in 1951, the Nagylengyel-2 well uncovered the Nagylengyel oil field. During the 1950’s, Hungary was forced to implement a high-speed industrialisation programme and oil demand increased accordingly. This demand could only be met with enforced field production programmes. This had serious adverse consequences, soon recognised at Nagylengyel field as early as 1954. The Nagylengyel wells produced 1.2 million tons of crude oil in 1955.

Following MASZOVOL’s lead, MASZOIL continued appraising the already producing Biharnagybajom field, developed in the Hungarian Lowlands. In 1951, a new oil reservoir was discovered in the Mezőkeresztes area. In 1953, two new natural gas fields were discovered (Nádudvar and Rákóczifalva) thus expanding the volume of identified hydrocarbon reserves.

In East Hungary, hydrocarbon exploration achieved another major success in 1956, following the winding up of MASZOIL in 1954 - the discovery of the Demjén crude oil reservoir.

This was at a time when exploration programmes were carried out at Nádudvar, Rákóczifalva, Tótkomlós, Szolnok, and at Püspökladány, Törtel, Tatárülés, Nagykőrös, Kaba, Furtazsák and Jászkarajenő.

In 1954, the Lowlands Crude Oil Production Company was established to perform ever-increasing production operations. The scope of these operations was extended to the Szolnok region, in 1955.

Increasing demand, strengthening of the crude oil industry

The Hungarian Oil & Gas Trust is founded

In 1957, the Hungarian crude oil industry was again integrated into a single entity, named the Hungarian Oil & Gas Trust (Hungarian acronym - OKGT), the gas industry joining in 1960. Companies within the Trust were re-structured several times and when the organisation was finally consolidated, practically no changes were made in the crude oil production company until 1991.

After establishment of OKGT, exploration operations continued in the Transdanubian area, near Nagylengyel, and resulted in the discovery of further oil reservoirs. Exploration efforts also proved successful in the Hungarian Lowlands (Algyő, Zsana, etc.).

By 1950, Transdanubian oil fields were supplying almost 99% of national crude oil production, but as a result of subsequent exploration operations, the onus of production then fell to the Lowlands region. Thus the Lowlands gradually took over the main role of crude oil and natural gas production. (Picture: Tápé-1 well, Zsana gas blow-out)

Tests and studies were carried out to try to restrict the impact of water influx in the fields. As a result of the secondary recovery methods applied in South Zala’s depleting oil fields, additional production was successfully achieved. Exploration operations continued in new areas and were sometimes successful.

Decline of crude oil production

In 1948-49, the nationalisation programme dramatically transformed the crude oil processing industry’s structure and system. Several smaller units and plants were wound up in the subsequent re-structuring process. Inter alia, the prestigious Hungarian Petroleum Co. and Fanto United Hungarian Mineral Oil Co. were liquidated. As a consequence of excessive crude oil production in the post-war years, recovery ratios fell significantly, and processing of much-decreased crude oil volumes did not even require remaining plants’ total capacity.

In 1951, the Nagylengyel crude oil field discovery caused production to start rising again, creating the need for a new refinery to process the field’s bitumen-rich crude oil. It was built at Zalaegerszeg in 1952, and reported to the Zala Oil Refinery Co. (Picture: construction of the ZKV)

Increasing demand for hydrocarbon in the 1950’s

During the second half of the 1950’s, hydrocarbon’s share of Hungary’s energy needs increased to such an extent that major developments in the processing industry were clearly required. In 1962, reconstruction of the Szőny Refinery was started. The Szőny and Almásfüzitő refineries were integrated, and a new company was established named the Komárom Oil Refinery Co, and in 1965, the Lardoline Oil & Grease Plant was also merged with this new entity.

In 1962, work began on a new refinery at Százhalombatta. Its main task was to refine crude oil imported from the Soviet Union. The first Duna Oil Refinery Company unit was commissioned in 1965.(Pictures of the construction of the Százhalombatta refinery and selected completed plants– 2-4 photographs)

In the 1970’s, the Tisza Oil Refinery Company added a new modern unit to expand the Hungarian crude oil processing sector. (Picture: TIFO in the 1980’s)

TIFO’s Nyírbogdány Plant ceased crude oil processing in 1983. In 1984, the Komáromi Oil Refinery Company also abandoned processing activities, and thereafter only served as a unit for further processing operations.

Foundation of MOL Plc.

The Hungarian petroleum industry in the present day

After several re-structuring exercises, the Hungarian Oil & Gas Company Plc was founded in 1991, as the legal successor to OKGT, and today the Hungarian petroleum industry operates within the framework of this company. We were able successfully to integrate the entire Hungarian hydrocarbon industry through the establishment of MOL, and only after a carefully considered selection process.

The source of our success

After centuries of exploration, and the development of opportunities to utilise hydrocarbons and implement up-to-date processing methods, Hungary can be rightly proud of its internationally-recognised results. Outstanding researchers and leading experts work to ensure optimum operating conditions for the Hungarian hydrocarbon industry, as well as first class opportunities for training and education.

brief C.V.s and portrait photographs in MOIM webpage

(The Hungarian Petroleum Industry Museum kindly supplied information for this history of the oil industry. May we extend our heartfelt thanks to the Museum!)

MOL Group (MOL) is the leading regional independent oil and gas company and one of the largest corporations in Central & South Eastern Europe.

MOL Group at a glance

MOL Group (“MOL” or “the Company”) comprises MOL, Hungary’s largest enterprise, the Slovakian oil company Slovnaft, the leading Hungarian petrochemical company TVK, the Austrian retail and wholesale company Roth, the Italian refining and retail company IES and the Croatian retail network Tifon. In addition, MOL has a strategic partnership with the Croatian national oil and gas company, INA (including a 25% stake), the Czech electricity group, CEZ and the Oman Oil Company (OOC), having 7 and 8% stake in MOL respectively.

MOL’s activities focus primarily on its core geographic region. It has close to 1,000 Filling Stations and exploration and production facilities in eight countries in Europe, the Middle East, Africa and the CIS states. MOL has upstream, downstream, petrochemical and gas transmission operations in over forty countries and is market leader in each of its core activities in Hungary and Slovakia.

MOL has produced Europe’s fastest growth in shareholder return in the past ten years, ahead of all its major industry peers on the continent, excluding Russian companies. MOL’s market capitalisation is worth around USD 16bn. The Group employs some 15,000 people, worldwide.

While focused on financial and business results, the Company has made significant advances in its social and environmental performance and corporate governance and is fully committed to Sustainable Development. Accordingly, it has systematically improved its operations and is making sustainability an intrinsic part of its corporate strategy.

Above this, in 2006 and 2007, ISS Corporate Services (formerly known as Deminor Rating ) adjudged MOL to be a company with excellent corporate governance and its overall ranking proved to be outstanding on a European level as well.

In the field of alternative energies, MOL has initiated a range of activities in support of sustainability principles. MOL was among the first companies in Europe to produce sulphur-free motor fuels, to blend bio-fuel and to advance the introduction of geothermal energy, thus systematically reducing Hungary’s carbon footprint.

As a result of MOL’s success, the Company has become an attractive destination for potential employees, permitting the development of an international pool of expert talent. In recent years, MOL has developed an outstanding employee compensation and benefit scheme, while offering strong international career opportunities.

How MOL became Europe’s most efficient oil and gas company

MOL was formed in 1991 by the merger of nine separate state-owned companies. It was then the first national oil and gas company in Central Europe to be privatised. This happened in several stages, beginning in the mid-nineties.

In the immediate post-Soviet period, industry was characterised by severe efficiency problems stemming from its state-run heritage. Consequently, the key objective of the Company was to increase shareholder value through a dynamic development and expansion strategy, as well as through internal efficiency gains and the exploitation of market opportunities. In many respects, MOL is now the most efficient European oil and gas company: MOL’s net cash refinery margin and net production income per barrel are the highest in Europe. These achievements would not have been possible without privatisation.

First steps in a regional expansion policy

1995 was a milestone year for MOL when it took its first small, but significant, step towards regional expansion - the opening of its first Filling Station abroad, in Transylvania, Romania.

In 1999, MOL Group strategy called for focus on its core activities, whilst embarking on a major expansion programme, including investments in refining. Today, MOL’s refinery pool is one of the most complex operations in Europe and is best-in-class in Central Europe.

In 2000, MOL, as the region’s pioneer in industry consolidation, became the first Central European oil company to establish a cross-border partnership - the acquisition of a 36% holding in the national oil company of Slovakia, Slovnaft. In the same year, MOL laid the foundations of its significant petrochemical business, by acquiring nearly 30% of TVK (Tiszai Vegyi Kombinát), Hungary.

The development of a regional player

2002 was a year of international expansion for MOL. It increased its holding in Slovnaft to a majority share, opening the way to integration of the two companies. In 2003, MOL acquired 25% of INA, marking the start of a highly successful strategic partnership. MOL also took a major step westwards, into Austria. The company purchased a fuel storage facility in Korneuburg, establishing the basis of wholesale operations there. It moved into the retail arena a year later, with the purchase of the Roth Filling Station chain.

In 2004, MOL bought Shell’s Romanian Filling Station network, making MOL the third largest operator in that market. In 2005, MOL opened its first Filling Station in Serbia and Montenegro and its network is expected to increase to 100 in Serbia by the end of 2010.

2007 was a very exciting year for the Company. MOL acquired further exploration licenses in Russia, Kurdistan and Cameroon. It established strategic co-operations with CEZ, Central Europe’s largest energy company, and Qatar Petroleum, one of the leading oil companies in the Middle East. IES, the Italian refiner and retailer became part of MOL Group, followed by Tifon, a Croatian Filling Station network, soon after.

Steps in regional expansion

2000

  • Acquisition of 36.2% of Slovnaft
  • Acquisition of 32.9% of TVK

2001

  • Control gained over TVK (stake 34.5%)

2002

  • Control gained over Slovnaft (stake 70.0%)
  • ZMB joint-venture signed

2003

  • Acquisition of 25% of INA
  • Acquisition of Austrian storage facility
  • Acquisition of Shell Romanian Filling Stations

2004

  • Acquisition of a 98.4% stake in Slovnaft, through public offering - full integration of Slovnaft
  • Acquisition of Roth, Austria

2005

  • Acquisition of Shell Romania

2007

2007 Events
19th July MOL and INA announce the discovery of a new natural gas field near Zaláta, in southern Hungary
31th July MOL announces acquisition of IES
2nd August MOL announces acquisition of Tifon
30th August MOL signs a Memorandum of Understanding for a strategic cooperation with CEZ
9th October MOL announces cooperation with Qatar Petroleum to exploit new and existing oil and gas fields
6th November MOL announces acquisition of a 40% stake in an offshore Cameroon block
7th November MOL announces production-sharing agreements in two Kurdish blocks in Northern Iraq
5th December MOL announces initiative to create a joint gas transmission company in Central & South East Europe.


MOL Group’s main objectives

MOL Group’s primary objective is to provide superior shareholder returns. It will achieve this by fully exploiting its market potential, implementing dynamic development and expansion strategies, and achieving, where possible, further internal efficiency improvements. MOL also aims to triple its hydrocarbon production and double its sales of refined products, by 2010.

MOL: the leading regional integrated, independent oil and gas company

Leading

  • Group profitability among the highest in the sector
  • Outstanding operational efficiency, highly competitive asset base

Regional

  • Leverage of favourable geographical position, strategic advantages and skills
  • Optimised logistics
  • Successful combination of organic and acquisitive growth

Integrated

  • Balanced portfolio based on regional Downstream growth and the geographic expansion of Upstream activities.
  • Optimisation of synergies within the Group along the value chain from Exploration to core Petrochemicals

Independent Oil and Gas company

  • Delivering on strategic plan
  • Strong track record on delivering value through partnerships and infrastructure development
  • Further capital withdrawal from non-core assets to focus on core businesses.
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