Lithuania is an EU member state, highly dependent on energy imports. It has small reserves of oil and gas, and imports the majority of its oil and gas consumption from Russia. Lithuania is the only Baltic state that possesses an oil refinery, which is the country’s major strategic energy asset. Lithuania has liberalised its gas transmission and distribution sectors, and unbundled its electricity generation, transmission and distribution.
Lithuania is part of the so-called EU-8 countries (The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia) which joined the EU in May 2004. Membership in the European Union (EU) has dominated the energy scene of the eight new member countries since May 2004. Existing directives, for example on energy security, nuclear safety, Internal Energy Market (IEM) and the Emissions Trading Scheme (ETS), now apply. EU-8 also takes part in the elaboration process of EU energy policy and legislation.
EU-8 plays an important transit role, as 27% of EU-15 natural gas supply and about 10% of its crude oil supply transits this area from the Commonwealth of Independent States (CIS). The area depends much more on Russian oil, gas and nuclear supplies but some of the 8 countries have diversified their import sources and routes as well as their fuel mix, and reduced their energy intensity. Nevertheless, except for the Czech Republic and Hungary, the EU-8 countries’ oil security systems (stockpiling and emergency plans) do not yet comply with EU and IEA standards. Poland and the Slovak Republic, however, have stepped up their efforts in this respect.
Increasing hydrocarbon prices, combined with and energy intensity twice the OECD Europe average, inflates energy expenses for households (10-20% of incomes) and businesses. But EU-8 governmental policies for energy efficiency have not yet sufficiently developed to tap into the abundant energy efficiency potential.
Market reforms have continued both domestically and regionally with the new objective to develop regional electricity and gas markets in Central Europe and the Baltics as they increasingly conform to the IEM. Harmonisation and convergence of regulation, notably fair cross-border access to networks and customers, are crucial to overcoming the constraints of traditional dominant vertically integrated companies, overly rigid long-term contracts, baseload overcapacity and persistent price distortions.
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