Bosnia and Herzegovina's natural gas supplier BH Gas said on Thursday it had received permission from the European Union to launch a project that would connect the country's gas grid to that of Croatia.

The Directorate-General for European Neighbourhood Policy and Enlargement Negotiations on Wednesday approved the preparation of a project to build the South Interconnection BH-Croatia, the company said.

The new natural gas pipeline would run from Zagvozd in southern Croatia to Posusje and on to central Bosnia and Mostar. BH Gas said it hoped the new supply route, which would be independent of Russia, would be operational by 2023.

The main financier of the project is the European Bank for Reconstruction and Development, which will provide a favourable loan arrangement.

The EU will for now support the project with €1 million in grants. The job of preparation of initial documentation has been awarded to the Mott MacDonald consortium through the CONNECTA project.

Bosnia and Herzegovina is currently completely dependent on Russian gas, which is supplied via Hungary and Serbia. The new pipeline via Zagvozd should ensure it access to the EU gas market and the future LNG terminal on the northern Croatian Adriatic island of Krk.

Croatia is expected to build a 60-kilometre long pipeline from Split to Zagvozd as part of the project, whereas the whole route from Zagvozd to Travnik is 114 kilometres with an additional 46 kilometres of a branch pipeline to Mostar.