The draft agreement on Hungary's participation in the South Stream project was coordinated during a visit by Russia's First Deputy Prime Minister Dmitry Medvedev to Budapest on February 25.
The South Stream project plans to transport 10 billion cu m of Russian gas annually across the Black Sea, with the first deliveries scheduled to start in 2013.
Bulgaria and Serbia have already joined the project, proposed by Russia's energy giant Gazprom and Italy's Eni.
Hungary first said it was seeking to participate in the South Stream project during a visit to Budapest by Russian Prime Minister Viktor Zubkov in December 2007. The country is also considering joining the Nabucco project.
The Nabucco pipeline, backed by the EU and U.S., will pump Central Asian gas to Europe via Turkey bypassing Russia. It is due to go on line by 2011, and will involve Turkey, Bulgaria, Romania, Hungary and Austria.
Russian President Vladimir Putin said earlier on Thursday that South Stream was not in competition with Nabucco.
"We are not competing with it. We are offering the opportunities and resources that are available; the task of our partners is very simple - take a calculator and work out what is more profitable," Putin said.
Russia is a major gas supplier to Hungary, meeting around 70% of the country's gas demands. Last year, Russia delivered 7.5 billion cubic meters of gas to Hungarian consumers, with a commitment to supply 10.7 billion this year.
Hungarian gas meets just 18-20% of local needs. The European country currently consumes 15 billion cubic meters a year, with experts predicting that gas consumption will increase to 17-18 billion cubic meters by 2015.