Zsolt Hernádi, 49, has led Mol, Hungary’s biggest oil refiner, since 2000 and has a contract that extends until 2014.

So it came as quite a shock in September when local media reported he would soon be replaced by Istvan Kocsis, head of BKV, a public transport company. Mol issued a swift denial.

The incident prompted speculation that Hungary’s new government would like to exercise more influence over Mol, which was gradually privatised in the 1990s.

There were also claims in the media that Mr Hernádi was a potential barrier to better relations between Hungary and Russia. The latter impression stems from the defence mounted by Mol’s chief executive against a hostile takeover approach in 2007 by Austria’s OMV.

After it was rebuffed, OMV last year sold its 21 per cent stake in Mol to Russia’s Surgutneftegas, an oil company, for €1.4bn ($1.8bn), prompting Mr Hernádi to claim OMV was acting as a “front” for Russian interests.

Mol has refused to let Surgut join its share register or take part in the company’s annual general meetings, deeming it to be a purely “financial investor”.

But Hungary’s new government has since initiated discussions with Russia on a range of energy matters, including the possible acquisition of the Surgut stake. Tamas Fellegi, national development minister, said last month that the Hungarian government would find it “beneficial” to become a shareholder in Mol.

Viktor Orban, prime minister, met his Russian counterpart Vladimir Putin in Moscow late last month, where the two sides agreed to hold more talks.

Mr Hernádi says: “Whenever there is a new government, there are rumours that it wants to influence Mol. If you ask ordinary Hungarian citizens, most of them still believe that Mol is a state-owned business. So it’s easy for people to believe that the government can decide something like this.”

He adds: “The board of directors has the decision-making rights [concerning who is chief executive] and I don’t feel they do not have trust in me.”

But would Mr Hernádi welcome the Hungarian government as a shareholder? “As long as the government is supportive of the strategy that Mol has and its corporate governance then it’s a positive step,” he says. “If the government wants to be a strategic investor, that would be a new situation.”

Mol is one of biggest oil and gas groups in central and eastern Europe with major upstream development projects as far afield as Syria, Pakistan and Kurdistan.

A strong performance from its upstream activities helped it report a market-pleasing set of third-quarter results. However, the company was forced to record a Ft19.8bn provision because of a new “crisis tax” imposed by the Hungarian government.

Mr Hernádi says that “of course nobody is happy to pay a new tax” but argues the company can live with it, so long as it is only temporary and accompanied by structural reforms. However, there are signs that the government is also considering some kind of revenue-raising measure after the tax expires in 2012.

Owing to energy companies’ large fixed investments, they cannot simply uproot and leave. But Mr Hernádi warns that the company has a choice how it allocates more than Ft300bn ($1.4bn) each year in investment capital.

“Our aim is to finance our investments from the available free cash flow. Thus, if we don’t see the stability and credibility behind this tax, we will have to think over our investment policy,” says Mr Hernádi.

In the meantime Mol’s biggest challenge is the integration of Ina, the Croatian oil group over which it gained management control in mid-2009.

Croatia’s parliament is holding an inquiry into why the government allowed Mol to raise its stake in INA from the 25 per cent that it acquired in 2003 to 47 per cent in 2008.

Mr Hernádi says he is focused on upgrading Ina’s efficiency, which he claims has improved considerably since 2008, when it was “very close to technical bankruptcy”.

He argues that new supply and transit routes are essential to improve competition and energy security in the region – a message brought home by a gas dispute between Russia and Ukraine in January 2009 that interrupted European supplies.

In October, Hungary and Romania unveiled a new link between their gas transmission systems. This was the first new interconnector built between post-communist states, which Mr Hernádi views as a key step towards creating a regional gas market. A Hungarian-Croatian gas interconnector is due to come on stream next year.

Mol is also a partner in the 3,300km Nabucco gas pipeline project that could one day transport Caspian gas to western Europe and thereby reduce the continent’s dependency on Russian imports.

But negotiations between buyers and potential suppliers – such as Iraq, Turkmenistan and Azerbaijan – have been laborious with both sides wary of the political and financial risks involved.

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