ISGS head, director removed for pinpointing irregularities

ISLAMABAD: In a shocking disclosure, the much-touted North-South and Gwadar-Nawabshah LNG pipelines and terminal at Gwadar have become controversial as the chairman of Board of Directors Inter-State Gas System (ISGS) and one director have been sacked for pinpointing the alleged massive irregularities in the said projects of worth billions of dollars.

Nawabzada Shahzad Ali Khan, Chairman Board of Directors of ISGS, and director Zubair Motiwala, pinpointed that both the projects with their costs at higher side are being initiated without the approval of the board.

Khan, in a letter to Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, of which the copy is available with The News, said that the step of the ministry to oust him and Zubair Motiwala from the board was quite illegal.

According to the official correspondence to the secretary of Ministry of Petroleum and Natural Resources Nawabzada Shahzad Ali Khan mentioned that the capital expenditures (Capex) of both the projects is $4.3 billion where the public will end up paying $1.012 billion annually.

“This means that the masses will pay back mammoth amount of $20.240 billion in next 20 years,” he argued saying that the said loans were against the sovereign guarantees. To this effect, he referred to the calculation sheet of Chief Financial Officer of Inter State Gas System (ISGS).

The said two projects envisage the establishment of structures having capacity of 1.2 billion cubic feet gas per day whereas the gas from LNG can at the maximum be 600 mmcfd.

When contacted, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said that Nawabzada Shahzad Ali and Zubair Motiwala had not been sacked for it; rather their term was over and they wanted their term be renewed.

The minister went on saying that Nawabzada Shahzad Ali has never been the chairman of the board of directors of the Inter-State Gas System (ISGS).Chairman of the board has not been there for a long time, so he chaired 8-10 meetings of the Board. The minister maintained that he did not receive the letter of Khan so far saying that writing the letter to the minister is of no use as it should have been written to the management of the company.

As far as the undertaking of the projects without approval of board is concerned, the minister said that both the individuals have long been part of the board and they know that IP, TAPI gas pipeline are approved by ECC first and then boar proceeds. Similarly Gawadr-Nawabshah and South-North pipelines are also approved by ECC and board is to follow the guidelines of ECC.

About the cost of the projects, the minister said that there is a price negotiating company which finalizes the cost and after that is approved by ECC. Spokesman of inter-state gas system also told The News that Nawabzada Shahzad Ali and Zubair Motiwala are no more part of the Borad of directors and they have been removed as per law.

However, Ali Khan, in his letter, also says that the gas from Iran is not insight in the near future, therefore the project of pipeline from Nawabshah to Gawadar which later to be called as Iran-Pakistan (IP) Pipeline should be re-evaluated technically and financially through independent evaluations to safe guard the national interests.

Khan said : “As a chairman I require Managing Director Mobin Saulat to convene the meeting of Board of Directors to dilate upon the issues highlighted in the letter dated on August 8, 2016, but instead of convening the meeting apparently vested interests started operating for my ouster from the board to achieve their designs.

According to another official document reveals that the minutes of the meetings are forged and changed and the decisions which are not approved are later shown as approved.

When drew the attention of the minister towards the forging of the minutes of the meetings, the minister said that it is the job of the company’s secretary and in every meeting the minutes are approved of the previous meeting with the consensus.

Khan, however, clearly mentioned that the Iran-Pakistan (IP) pipeline was reshaped to Gawadar-Nawabshah pipeline without technical and financial feasibility study resultantly the consultant appointed for IP gas line project was also signed for the work for LNG terminal and Gawadar-Nawashah pipeline without authorization of Board of Directors of ISGS and against the legal position under PPRA rules.

Eminent lawyer Khalid Anwar also later on confirmed saying that that the decision to undertake LNG terminal and Gawadar-Nawabshah pipeline has been taken without carrying feasibility study, availability of options and its cost benefits. Apparently the administrative decision was taken in haste and without proper evaluation and also without authorization of board of directors.

The document also says that Gawadr-Nawabshah pipeline to be constructed by Chinese company has been projected on the basis of loan. The loan has been agreed on commercial terms apparently without the actual feasibility and without adopting the proper competitive process.

The project is being undertaken as government to government on single bid basis with no competitive tendering. The public money is also involved as government will extend equity and sovereign guarantee to secure the loan for the project of worth $2.1 billion. The document also says that again the process has been undertaken without approval of the board of directors, but the managing Director alone apparently took the decisions under the direct interventions of the ministry of petroleum and natural resources.

In the document, Khan argues that since the future supply of gas from Iran remains uncertain so there is no justification of laying 700 kilometers long pipeline and LNG terminal costing over $2.1 billion just to supply 600 mmcfd of LNG from Gawadar whereas another LNG terminal at Karachi at much lesser cost can be installed. Mr Khan has termed the whole process as tainted.

The minister did not agree the impression that laying down of LNG pipeline is not feasible as the supply of gas from Iran is uncertain. The minister explained that for IP pipeline there was no funding available for the project which is why the strategy was changed under which the pipeline has been renamed as LNG pipeline from Gwadar to Nawabshah with 700 kilometers  which is why the Chinese companies which were earlier hesitant to fund the project but after the project was renamed, they came forward and decided to extended the commercial loan for the project. 

The IP line was not possible in the presence of UN, US and EU sanctions for Iran’s ambitions to become nuclear power. Now the US sanctions have eased as Iran has decided to roll back its nuclear plan, but still there are some sanctions still imposed on IP pipeline. Under the new scenario, the LNG pipeline will be laid down from Gwadar to Nawabshah as per the specifications mentioned  in the IP pipeline. 

 The minister said whenever the sanctions will be lifted the LNG pipeline will be extended by 81 kilometers backward to the Iranian in border for intake of the 750 mmcfd gas from Iran as per the GSPA (gas sales purchase agreement) signed with Iran. The minister hoped that during the construction of LNG pipeline , sanctions on IP gas line will be lifted by US keeping in view the increasing relation of US with Iran and the LNG pipeline will be renamed as IP gas line. However, under new scenario, the pipeline will also transport the 750 mmcfd gas from Iran and 500 mmcfd gas from LNG terminal. This means pipeline will transport 1.25 bcfd. There is also an understanding with Iran under which Iran will increase the export of LNG 250 mmcfd more and in this way the pipeline will be able to carry 1.5 bcfd gas (1 bcfd gas from Iran and 500 mmcd RLNG from terminal to be instated at Gwadar.) .

The document says that ISGS has also initiated the said South-North LNG pipeline project without adopting the commutative process under the guise of the government to government contract. It also mentions that the scope of the project has been changed from Karachi-Lahore to Nawabshah-Lahore without any technical and financial feasibility study and without the authorization of the board of directors of the Inter State Gas System.

The minister on this particular issue said that the price negotiating committee is in process to finalize the cost of the said project and this project is being made on BOT (built, operate, transfer) basis under g-to-g arrangement.Meanwhile, the government has reduced the strength of the board of directors to seven members which include Additional secretary administration (MoPNR), Chief Secretary Balochistan, Joint Secretary, Director General (LNG), Managing Director GHPL, Managing Director SSGC and managing Director SSGCL to tame the board and get the decisions that government wants approved, this has been unraveled in the official communication addressed to managing director of ISGS date August 11, 2016 signed by Deputy Secretary Muhammad Latif Awan.

In the said communication it was mentioned that independent directors will be appointed in due course of time. The minister, however, admitted that the number of board members has been reduced and independent members will be included in the board later on. The minister dispelled the impression that all seven government members are included to get the decisions of own liking approved with no hurdle.