AAFS Infrastructure and Energy, the US company selected to develop Bosnia and Herzegovina’s Southern Gas Interconnection, says preliminary calculations point to a potential cost advantage versus Russian supplies. The analysis suggests that LNG delivered through Croatia could be materially cheaper than the Russian gas on which the country currently depends. The commercial case is being framed alongside a geopolitical rationale for adding an additional supply corridor.
AAFS estimates that LNG routed through Croatia’s Krk terminal could cost about 38% less than existing Russian supplies. The timing aligns with preparations by Gazprom to increase prices for Bosnia and Herzegovina by more than 14% during the current quarter. The expected impact is described as extending to households, industrial consumers, and the Federation’s public finances.
LNG cost estimates and household bill implications
Under the AAFS scenario, a Sarajevo household consuming approximately 1,200 cubic metres of gas annually could face a bill of around €460. That compares with roughly €860 under current Russian supply prices. The calculation is described as provisional because final transmission, distribution, and capacity charges cannot be set until the pipeline configuration and operating framework are completed.
The proposed supply arrangement would link Bosnia and Herzegovina to the Croatian transmission network and, via that network, to the Krk LNG terminal. This would create access to seaborne cargoes and could enable longer-term US supply contracts. Those contracts are described as commonly priced against the Henry Hub benchmark.
The analysis also points to potential pricing transparency from such contract structures. It says this could reduce exposure to bilateral supply decisions made by a single dominant supplier.
What determines whether savings reach end-user tariffs
The project’s economics are stated to depend on more than the headline LNG price. Factors cited include capacity booking at Krk, Croatian network tariffs, pipeline utilisation, financing costs, and the relatively modest size of the Bosnian gas market. The unit cost effect of utilisation is highlighted as relevant to whether projected savings translate into lower end-user tariffs.
A pipeline with low initial utilisation would carry higher unit transportation costs, which would weaken part of the projected advantage. Even with an estimated 38% cost differential at the LNG level, conversion into retail pricing would therefore depend on how volumes develop after commissioning.
Diversification and cross-border framework for construction
The existing supply structure is described as leaving Bosnia and Herzegovina unusually exposed due to limited diversification. The country remains dependent on a single entry route for Russian gas. By adding a second corridor, the Southern Gas Interconnection is presented as improving negotiating leverage and providing an alternative during contractual or physical disruptions.
The Federation authorities are preparing an implementation agreement with AAFS following an intergovernmental agreement signed by Croatia and Bosnia and Herzegovina in April. That April agreement is described as establishing the cross-border framework for construction and moving the project beyond its period of political and administrative delay.
Anchor demand requirements for pipeline bankability
The commercial test is whether Bosnia and Herzegovina can secure sufficient anchor demand to support the pipeline’s fixed costs. Demand sources cited include district heating systems, industrial consumers, and future gas-fired generation. The 38% cost advantage is referenced as strengthening the case while bankability remains tied to further commitments.
Bankability is described as depending on binding capacity commitments and a tariff structure able to withstand volatile LNG markets alongside changes in Russian pricing.
