Company May Retract Offer to Build Pipeline

PSG, a company forming part of a consortium to build a gas pipeline from Turkmenistan to Turkey, may withdraw its offer to build the line unless Turkmenistan approves it soon, a spokesman for PSG shareholder General Electric Capital said Friday.

"We continue to have an offer outstanding with the Turkmen government. If we don't receive an answer in the near term we may withdraw the offer," said Ken Koprowski, vice president of communications for General Electric Capital Structured Finance, by telephone from the United States.

He declined to say how long the company would wait for its proposal to build the line, lodged March 20, to be accepted or rejected. PSG and oil company Shell each have 50 percent of Trans-Caspian Gas Pipeline, a consortium set up to build the link.

But he said there were no plans to disband PSG. Asked if the company planned to pull out of TCGP altogether, he replied: "I'm not aware of any change in the situation with the mandate. As far as I understand it we have an outstanding offer with the Turkmen government."

Last month, PSG announced it was cutting staff and spending in response to slow progress by Turkmenistan in considering its proposal, which involves building a 2,000-kilometer pipeline between Turkmenistan and Turkey via Azerbaijan and Georgia at a cost of around $2 billion.

Turkmenistan has vast reserves of gas but the landlocked republic lacks access to international markets. It has long sought to build a new line to the booming Turkish market.

But Turkmen President Saprmurat Niyazov has recently appeared to cool toward the TCGP project.

Last month, shortly before President Vladimir Putin visited Turkmenistan, he said on state television that PSG was demanding unjustifiably high profit margins and added that he wanted the company to meet its contractual obligations.

Just days later PSG said it would scale down staff and spending.

Then Niyazov and Putin reached a preliminary agreement during Putin's visit May 19 under which Russia agreed to increase purchases of Turkmen gas by 10 billion cubic meters a year until total purchases reached 50 bcm to 60 bcm.

This appeared to be a serious blow to plans to build a Trans-Caspian pipeline as Turkmen production is simply not big enough to supply such huge volumes to Russia and to send 16 bcm to 30 bcm through the Turkish route.

Turkmenistan produced just 13.2 bcm in 1998, although output bounced back to 23 bcm last year. It produced nearly 85 bcm per year in Soviet times.