The European Investment Bank (EIB), the European Union's financing institution, is providing ECU 125 million(1) for upgrading Hungary's main oil refinery and a country-wide service station network. The loan is granted to MOL Magyar Olaj- és Gázipari Rt., Hungary's largest company.

The EIB loan will cover one half of the investment cost for a delayed coker with an annual capacity of 1 million tons at the Duna Refinery, some 30 km south of Budapest, as well as improvements to MOL's domestic service stations selling the refinery's higher value oil products.

Commenting on the loan, EIB Vice-President Wolfgang Roth said: 'Within a context of forthcoming EU accession and the consequent need to meet the environmental norms in the Union, MOL wants to further upgrade its installations to allow a fuller conversion of crude oil by increasing output of higher-quality fuels to better meet evolving market needs. The EIB as the long-term financing institution of the EU is a natural partner for financing such investment. MOL's Senior Vice President-Finance, Dr. Veronika Dank-Szentgyörgyi, added 'This loan with a 15-year maturity is a milestone in MOL's life. The total cost of the residue processing project will be nearly HUF 50 bn, which would make it the largest investment in our history. Since petroleum projects tend to have a fairly long amortisation period, the best approach is to adjust the maturity and repayment patterns accordingly with long-term funding at appropriate terms and conditions. EIB is a good partner for MOL in this respect. The successful completion of the project will enable MOL to develop a product structure that better meets the market and environmental requirements'.'

The loan for MOL brings total EIB financing in Hungary close to ECU 1.1 billion. Previous EIB loans mainly contributed to the modernisation of the rail, road, telephone and electricity networks. The air-traffic control system was also modernised with the help of the EIB. An important number of small and medium-scale industrial and tourism ventures as well as municipal infrastructure investments were also financed through EIB global loans (credit lines) made available to the Hungarian banking network.

The vast majority of EIB loans regularly go to investments in the EU countries. Financing of the EIB in favour of projects in Hungary and the other Central European countries are an integral part of the wider pre-accession strategy of the European Union. Between 1990 and 1997 the Bank provided a total of ECU 6.3 billion for projects in Albania, Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. ECU 1.5 billion were provided in 1997 alone. In 1998 the EIB plans to double its lending in the region.

(1) On 31 December 1997, 1 ECU = DEM 1.98; USD 1.10; GBP 0.67; HUF 224.71.