Agreement talks with AAFS Infrastructure & Energy
Plans for the Southern Gas Interconnection between Bosnia and Herzegovina and Croatia remain delayed as developers work through 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. Negotiations with AAFS have continued, but no final agreement has been reached.
Financing structure and demand risk considerations
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. The structure could require guarantees or other financial backing from the Federation of Bosnia and Herzegovina. Such an approach would shift part of the project’s future demand risk to the public sector.
Interstate framework and ratification linked to political disputes
The pipeline also requires an interstate framework between Bosnia and Herzegovina and Croatia. Ratification has become linked to wider political disputes, while treatment of state-owned property is another potential construction obstacle. Around 30% of the planned route is expected to cross state-owned land. Existing restrictions on disposal of such property mean a legal solution will be needed before construction can proceed through those sections.
Route entry point and network scope for Bosnia
The project is intended to create a second gas import corridor into Bosnia and Herzegovina from Croatia. It would enter 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.
Pre-construction status and potential anchor demand
The planned system is considerably larger than Bosnia and Herzegovina’s current gas demand. Gas-fired power generation has been considered as a potential anchor consumer. For now, the project remains pre-construction, with financing, contractual arrangements, interstate ratification and land rights unresolved. The timetable therefore remains highly uncertain.
