Plans for the Southern Gas Interconnection between Bosnia and Herzegovina and Croatia remain delayed as developers struggle to resolve financing, state-property and interstate-agreement issues.
A planned agreement with US company AAFS Infrastructure & Energy, initially expected in June, has yet to be concluded.
Project financing is emerging as one of the more difficult issues. Bosnia and Herzegovina’s existing gas demand may be insufficient to support a conventional financing structure, potentially requiring guarantees or other financial backing from the Federation of Bosnia and Herzegovina.
Such a structure would transfer part of the project’s future demand risk to the public sector.
Negotiations with AAFS have continued, but no final agreement has been reached.
The pipeline also requires an interstate framework between Bosnia and Herzegovina and Croatia. Ratification has become linked to wider political disputes, while the treatment of state-owned property represents another potential construction obstacle.
Around 30% of the planned route is expected to cross state-owned land. Existing restrictions on the disposal of such property mean a legal solution will be needed before construction can proceed through those sections.
The project is intended to create a second gas import corridor into Bosnia and Herzegovina from Croatia, entering near Posusje from the direction of Zagvozd.
From Posusje, the network would extend through western and central Bosnia and Herzegovina, including proposed routes towards Mostar, Bugojno and Novi Travnik, with additional branches envisaged.
The planned system is considerably larger than Bosnia and Herzegovina’s current gas demand. Gas-fired power generation has consequently been considered as a potential anchor consumer.
For now, however, the project remains pre-construction. Financing, contractual arrangements, interstate ratification and land rights all remain unresolved, leaving the timetable highly uncertain.
