Synthetic natural gas (SNG) derived from biomass gasification is a potential transport fuel and natural gas substitute. Using the Netherlands as a case study, this paper evaluates the most economic and environmentally optimal supply chain for the production of biomass based SNG (so‐called bio‐SNG) for different biomass production regions and location of final conversion facilities, with final delivery of compressed natural gas at refueling stations servicing the transport sector. At a scale of 100 MWth, in, delivered bioSNG costs range from 18.6 to 25.9$/GJdelivered CNG while energy efficiency ranges from 46.8–61.9%. If production capacities are scaled up to 1000 MWth, in, SNG costs decrease by about 30% to 12.6–17.4$ GJdelivered CNG−1. BioSNG production in Ukraine and transportation of the gas by pipeline to the Netherlands results in the lowest delivered cost in all cases and the highest energy efficiency pathway (61.9%). This is mainly due to low pipeline transport costs and energy losses compared to long‐distance Liquefied Natural Gas (LNG) transport. However, synthetic natural gas production from torrefied pellets (TOPs) results in the lowest GHG emissions (17 kg CO2e GJCNG−1) while the Ukraine routes results in 25 kg CO2e GJCNG−1. Production costs at 100 MWth are higher than the current natural gas price range, but lower than the oil prices and biodiesel prices. BioSNG costs could converge with natural gas market prices in the coming decades, estimated to be 18.2$ GJ−1. At 1000 MWth, bioSNG becomes competitive with natural gas (especially if attractive CO2 prices are considered) and very competitive with oil and biodiesel. It is clear that scaling of SNG production to the GWth scale is key to cost reduction and could result in competitive SNG costs. For regions like Brazil, it is more cost‐effective to densify biomass into pellets or TOPS and undertake final conversion near the import harbor. © 2018 Society of Chemical Industry and John Wiley & Sons, Ltd