(MENAFN - AFP) The Russian energy giant Gazprom and Hungarian electricity company MVM agreed on Wednesday to build Hungary's section of the South Stream natural gas pipeline.
At a press conference in Budapest, Gazprom deputy chairman Alexander Medvedev and MVM chief executive Csaba Baji signed an agreement to form a joint-venture, South Stream Hungary, that is to build the 229-kilometre (366-mile) section between Hercegszanto and Tornyiszentmiklos.
The pipeline, expected to cost around 600 million euros (780 million), will have an annual capacity of 30 billion cubic metres of gas and is scheduled to begin operations in January 2016, Baji said.
He added that 70 percent of the costs would be covered by bank financing.
"South Stream is an important element in Europe's energy security, and can bring long-term benefits and stability to Hungary," Medvedev said.
Baji said that the South Stream pipeline, which will bring gas from Russia to Hungary via the Black Sea, Bulgaria and Serbia will "strengthen the energy security of both Hungary and the European Union."
According to Baji, the infrastructure through which gas from Russia arrives in Hungary via Ukraine will remain in operation.
"South Stream will not automatically mean that Hungary will not import gas from Ukraine," he noted.