Estonia

Estonia is an EU member state, highly dependent on energy imports. It produces some oil domestically from oil shale, but imports 100% of its gas consumption. Estonia has no oil refineries and has to import oil products. It has some surplus power generation capacity and is a net electricity exporter (mostly to Latvia). Estonia has privatized its sole gas importer and distributor, Eesti Gaas, and has committed to unbundling its electric utility, Eesti Energia.

Estonia 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 preparation of EU energy policy and legislation.

EU-8 plays an important transit role, as 27% of natural gas supply and about 10% of crude oil supply of the first 15 EU members (EU-15)¹  transits this area from the Commonwealth of Independent States (CIS).  The 8 new members of EU depend much more on Russian oil, gas and nuclear supplies than EU-15 but some of them have diversified their import sources and routes as well as their fuel mix, and reduced their energy intensity. 

Increasing hydrocarbon prices, combined with 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 Internal Energy Market Directive. 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.