Bosnia and Herzegovina’s proposed Southern Gas Interconnection is acquiring a stronger commercial rationale as well as a geopolitical one, with preliminary calculations suggesting that liquefied natural gas delivered through Croatia could be materially cheaper than the Russian gas on which the country currently depends.
AAFS Infrastructure and Energy, the US company selected to develop the project, estimates that LNG delivered through Croatia’s Krk terminal could cost about 38% less than existing Russian supplies. The analysis comes as Gazprom prepares to raise prices for Bosnia and Herzegovina by more than 14% during the current quarter, increasing pressure on households, industrial consumers and the Federation’s public finances.
Under the AAFS scenario, a Sarajevo household consuming approximately 1,200 cubic metres of gas annually could face a bill of around €460, compared with roughly €860 under current Russian supply prices. The calculation remains provisional because final transmission, distribution and capacity charges cannot be established until the pipeline configuration and operating framework have been completed.
The proposed supply structure would connect Bosnia and Herzegovina to the Croatian transmission network and, through it, to the Krk LNG terminal. This would provide access to seaborne cargoes and potentially to longer-term US supply contracts commonly priced against the Henry Hub benchmark. Such contracts could offer more transparent pricing and reduce exposure to bilateral supply decisions by a single dominant supplier.
The project’s economics will ultimately depend on more than the headline LNG price. Capacity booking at Krk, Croatian network tariffs, pipeline utilisation, financing costs and the relatively modest size of the Bosnian gas market will determine whether the expected savings can be converted into lower end-user tariffs. A pipeline with low initial utilisation would carry a higher unit transportation cost, weakening part of the projected advantage.
Even so, the existing structure leaves Bosnia and Herzegovina unusually exposed. The country has no meaningful supply diversification and remains dependent on a single entry route for Russian gas. The Southern Gas Interconnection would introduce a second corridor, improve negotiating leverage and provide an alternative during contractual or physical disruptions.
The Federation authorities are preparing an implementation agreement with AAFS following the intergovernmental agreement signed by Croatia and Bosnia and Herzegovina in April. That agreement established the cross-border framework for construction and moved the project beyond its long period of political and administrative delay.
The commercial test will be whether Bosnia and Herzegovina can secure sufficient anchor demand from district heating systems, industrial consumers and future gas-fired generation to support the pipeline’s fixed costs. The 38% cost advantage provides a powerful argument, but bankability will depend on binding capacity commitments and a tariff structure capable of surviving both volatile LNG markets and changes in Russian pricing.
