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January 6, 2020

ISGS MD on way to expulsion as approver can’t continue as MD ISGS


January 6, 2020

ISLAMABAD: Mobin Saulat, who is serving as Managing Director (MD) of the Inter-State Gas System for almost close to one decade is under fire and may face expulsion after he became approver against former Prime Minister of Pakistan Shahid Khaqan Abbasi in the case of contract award of LNG terminal to Engro Elengy Terminal Private Limited (EETPL).

The man who becomes approver can avoid the punishment, but cannot continue with official slot he is holding. Similarly, Mobin Saulat who continues to get hold slot of ISGS MD cannot be allowed to proceed as MD as he is considered partner in crime.

In a letter to NAB available with The News, Mobin Sault himself wrote in paragraph-3 saying: “I want to become an approver under section 25 of NAO 1999 in aforesaid investigation (in the case of contract award of LNG terminal to Engro Elengy Terminal Private Limited (EETPL). I want to make full and true disclosure of the whole circumstances within my knowledge relating to the said offences, including the role which I played and the role of co- accused involved in the said investigation, whether as principle or abettor or otherwise.’’ However, Saulat insists saying that he is a not approver rather he is a witness in the case.

The News filed this story based on documents from NAB, Petroleum Division, and background interviews and more importantly based on the detailed response from Mobin Saulat, ISGS MD.

Moreover, Saulat is facing a long charge sheet starting from manipulation in the minutes of Board of Directors meetings of Inter State Gas System when Shahzad Ali Khan was the chairman, hoodwinking the high ups in Petroleum Division in official correspondence and keeping BoD in the dark, making alleged money of $2-3 million in signing the contract with consultancy firm--ILF to the failure in initiating any project in last 10 years and expelling many people from the ISGS not only to justify his presence as MD but also for the fact that company is doing nothing and making no money up to not safeguarding Pakistan’s interests in gas deal with Turkmenistan under TAPI project.

Even NAB says in its letter to the Petroleum Division written on November 26, 2019, that Saulat cannot represent Pakistan aboard with regard to trans-nation gas agreements as he is involved in corrupt practices and is under investigation.

Based on the NAB letter, Petroleum Division wrote a letter to newly re-constituted BoD to convene emergent meeting and take up the issue of NAB letter and let the law take its course, but company secretary unscrupulsy shared this secret letter with Managing Director Mobin Saulat, who did not share it BoD in the first meeting rather management responded saying that the management has discussed the letter and exerted pressure on Petroleum Division to take it back.

The News when contacted, Chairman ISGS Ibne Hasan said that BoD did not receive the said letter of the Petroleum Division.

However, the first meeting of new BoD meeting held in which appointment of directors and his appoint as chairman was approved. However, he insisted saying that the letter from Petroleum Disvsion was not discussed as BoD did not get the said letter.

The News sent a question to Secretary Petroleum Division saying: ‘Sir came to know that Petroleum Divsion wrote a letter to BoD of ISGS through company secretary seeking emergent meeting of BoD to decide fate of Mobin Saulat based on the NAB letter.

But company sec shared the letter with MD Mobin Saulat and kept the BoD in dark and instead exerted pressure on PD to take back this letter saying the management have discussed it and will decide in future who will represent ISGS aboard.

The NAB letter had asked PD saying Mobin Saulat cannot be allowed to go abroad and how can he continue as MD as he is involved in corrupt practices. Sir, BoD could not take up this issue as the letter was intercepted by the MD, and he managed to get the letter taken back by the section in the Petroleum Division. Plz give me your response.’ However, Secretary Petroleum responded just saying that he will soon revert on this issue.

When the same question was placed before MD ISGS Mobin Saulat, he responded saying: “It was a misunderstanding. The NAB letter was only to send somebody in case urgent travel is required. However, multiple time permission to travel has already issued by interior / federal government. So now I can travel to attend important meetings. Secretary has apologised for the misconception and told section to withdraw the letter. Anyway response sent to ministry for the factual position. Board meeting already held. The extensive work is underway on North-South project based on latest letter from Russian Minister Novak.”

Saulat rose to prominence and emerged as powerful MD first when Dr Asim Hussian became Adviser to PM on Petroleum and Natural Resources and after his departure, he also managed to maintain his slot when Shahid Khaqan Abbasi became Federal Minister for Petroleum and Natural Resources and played pivotal role in awarding contract of LNG Terminal-1 to EETPL. Saulat is said to have successfully managed to creep into the offices of top officials of Petroleum Division through lower staff like octopus as whenever any move regarding ISGS is done, Saulat is the first one who gets to know that something is being done about ISGS.

Mr Saulat, who on behalf of Pakistan, signed as MD ISGS on all trans-gas deal, including gas sales purchase agreement with Turkmen Gas Company under Turkeminstan -Afghanistan-Pakistan-India (TAPI) gas line. It has been found that he failed to safeguard Pakistan’s interest while finalising the GSPA under TAPI project.

It was Nadeem Babar, Special Assistant to PM on Petroleum who found glaring mistakes in the agreement such as Pakistan would borne the gas transit risk in Afghanistan’s territory and Pakistan’s financial liabilities will be invoked when the gas reach Turkmen-Afghan border.

These glaring mistakes show that Saulat failed to safeguard the interests of Pakistan and to cope with this loss, Babar swung into action and took up the issues with Turkmenistan’ top mandarins and in return Turkeminstan assured that it will provide the insurance cover to the gas transit loss in Afghanistan and Pakistan will not bear the loss. Pakistan under new scenario also raised the issue saying that its financial liabilities will be invoked only when the gas reaches on Pak-Afghan border and the authorities in Turkeminstan have agreed.

However, the criminal mistakes in the agreement show that Saualt is not capable of safeguarding Pakistan interest and he also lacks the required ability to negotiate and execute the agreement in the supreme interest of the country. When brought into notice of Mobin Saulat that the negotiated gas deal GSPA under TAPI signed by you sir on behalf of Pakistan has turned out to be faulty as you did not manage to get included the clause ensuring the gas transit loss in Afghanistan will not be borne by Pakistan. Now the SAPM Nadeem Babar has taken up this issue with Turkmenistan, don’t you think that it is a charge sheet against you. Explain your position.

Mobin Saulat said: “The charge-sheet is baseless and against the facts. ISGS is managing the TAPI Project in line with the Inter-Governmental Agreement and Gas Pipeline Framework Agreement (GPFA) signed by the government with the other TAPI countries in 2010. The GPFA had envisaged the delivery point to be Turkmen-Afghan border where after the three buyers ie Afghanistan, Pakistan and India agreed to transport the gas to their respective off take points. Accordingly, the whole project was structured and agreements were negotiated and signed by all the three buyers. It was a well-considered decision of the three buyer countries in 2010. The GSPA thus negotiated by ISGS was in line with the principle agreed by the sovereigns and provides extensive mechanism of dealing with FM events. More importantly, Turkmenistan with 85% shareholding in the implementation company (TPCL) has taken the responsibility of Building and Operating this $10 billion pipeline from Afghanistan-Turkmen border to Pakistan-India border. Further protection will be provided in the ongoing negotiation of the Gas Transportation Agreement. Currently, MOE-PD has indicated to review this matter with Turkmenistan.

But obviously, any decision in this regard, cannot be taken by Pakistan alone and any change therein would require amendment in the GPFA, GSPAs, Operations Agreement and other related agreements of all the buyers. So far Pakistan, along with the other buyers, is injecting equity into the Project on the basis that Turkmen-Afghan border is the Delivery Point.”

And the top official said that consultancy contract was deliberately mishandled by MD ISGS for provision of services under Stage-2 of the Consultancy Contract with ILF. Stage-2 services included procurement support and project management on Man-day rate basis and were supposed to start after completion of FEED (Front End Engineering Design under Stage-1 services).

MD ISGS took Adviser to PM for Petroleum Dr Asim Hussain to ILF’s Germany office in 2011 and signed minutes of meeting in October 2011 at ILF Germany office which showed ISGS inclination for start of Stage-2 services immediately.

This was despite the fact that Stage-1 services (which were fix priced) ended in September 2012.

The adverse effect of signing those minutes was that ISGS had to pay man-day rates at Euro-Dollar parity of October 2011 because ILF insisted that minutes were signed in the presence of Adviser Petroleum.

This was a deliberate favour obtained by Mobin Saulat from ISGS Board as Euro-Dollar parity was significantly in favour of ILF in October 2011.

As a result of higher man-day rates (in USD terms) ISGS incurred a loss which is to the tune of USD 3.0 million (when applied to whole value of Stage-2 of Consultancy Contract)

On this particular issue, MD ISGS in his defense said that all the official chronology is available and has been duly audited by commercial auditors as well as statutory auditors. Necessary deliberation and requisite board approvals are all available. He further said that in fact, huge savings were made during execution of consultancy agreement and was appreciated. Duration of stage 2 activities was drastically reduced as project got stalled because of sanctions. No favour from the consultants was ever received, all data is available for public information.

The letter written by Shahzad Ali Khan, the then Chairman Board of Directors on August 10, 2016 available with The News mentioned some approvals inserted by MD Saulat which were not accorded approval in board meetings. This letter had mentioned the salary of many officials has been increased by MD without approval of board of directors and on this very issue Mr Khan adopted to resign. When asked if Sir being MD, you have been under severe criticism for changing the minutes of the board meeting of ISGS in the past. Why Shahzad Ali Khan was removed from BoD? Plz explain

Mr Saulat said that the allegation of changing the minutes of the board meeting was levelled by Shahzad Ali Khan when he was removed from the ISGS Board. It may be noted no such allegation was levelled by him during the period he served on the ISGS Board. Shahzad Ali Khan not only completed his three years tenure on the ISGS Board but surpassed the same by 8-9 months before he was removed by Petroleum Division from the Board. Further explanation about his removal may be sought from the ministry.

When questioned saying you have been MD ISGS for almost one decade but you have so far failed to launch any project and execute it, why? He said that the impression is based on misconception and lack of understanding of ISGS’s operations and mandate. ISGS was incorporated as a SPV of SSGC and SNGPL with a strategic view of exploring gas import options predominately the Iran Pakistan Gas Pipeline Project. Last 10 years have witnessed successful execution of Iran, Pakistan Gas Sales Purchase Agreement (GSPA) as well as TAPI GSPA. The gas volumes locked in (1.3 Bcfd and 750 MMcfd) equal more than 50% of Pakistan’s total indigenous gas production hence will be critical to ensure security of gas supply for Pakistan. Moreover, the gas pricing and commercial terms agreed in these GSPA’s remain a yardstick for the future gas import agreements (LNG SPAs).

During the last 10 years ISGS ventured into energy infrastructure development projects like TAPI, IP, LNG Terminal etc. besides persevering with the primordial objective of stimulating gas import options. The ISGS has been assigned to undertake Iran Pakistan Gas Pipeline Project (IP Project), Gwadar Nawabshah LNG Terminal and Pipeline Project (GNGP), Turkmenistan, Afghanistan, Pakistan, India Gas Pipeline Project (TAPI Project) and North South Gas Pipeline Project (NSGP).

We have launched strategic concepts towards adding secured energy supplies to the nation’s Energy Mix. Other than piped gas imports, we have also tasked to develop Oil pipeline project.

The status of each project is given below:

For the IP Project, ISGS signed the Gas Sales and Purchase Agreement, Operations Agreement, and completed the Feasibility Study, detailed route survey, FEED, ROW, finalised EPC contract and even groundbreaking successfully done. However, due to international sanctions on Iran especially the US sanctions, the Force Majeure notice had to be issued to Iran. Iran has recently executed the amendment in the Gas Sales and Purchase Agreement to extend the execution period for the implementation of the Project for another term of five years and withdraw its legal notice. A Reko Diq type of arbitration was averted. The ISGS is absolutely ready to execute the project and can resume project implementation whenever the sanctions on Iran are lifted or government takes a decision in this regard.

As an alternative strategy to implement the IP project, strategy was devised to develop Gwadar-Nawabshah Gas Pipeline Project (GNGP). The ISGS negotiated the EPC plus F agreement with Chinese company (CNPC) under the G to G agreement. The EPC+F agreement was initialed between the two ISGS and CNPC and approved by ISGS Board of Directors.

The PC1 for the Project was approved by CDWP and Ecnec; however, the Cabinet Committee on Energy under the Nawaz Sharif chairmanship directed the Ministry of Energy (Petroleum Division) to drop the Project. In compliance with the policy decision by government, the Project was dropped.

For the TAPI Project, he said, ISGS has signed the Gas Sales and Purchase Agreement, Operations Agreement, Shareholders Agreement, Investment Agreement. The Gas Transportation Agreement with TPCL is currently under negotiations. MOE-PD is currently negotiating Host Government Agreement with TCPL-the Project Company. The ground work has already started in Turkmenistan and Afghanistan, while the ground breaking ceremony would be held in Pakistan after the signing of host government Agreement. The government is also re-negotiating gas price with Turkmenistan. Despite huge challenges in the implementation, all four countries are working together to ensure fast implementation of the Project since it will be a regional hallmark.

For the NSGP, ISGS has been negotiating BOOT agreement with the Russian nominated company; however, due to US sanctions on Russia nominated company, the Project structure has not been approved by the MOE-PD under the G to G agreement. MOE-PD has asked the Russian side to submit revised project structure. ISGS has no role in the Project structure and is currently awaiting government nod on this issue. ISGS is ready to resume BOOT agreement negotiations immediately after its approval by MOE-PD. Moreover, for the transportation tariff, MOE-PD is submitting a summary for the constitution of Price Negotiations Committee. ISGS, again, has no role in the PNC, and would only assist MOE-PD as and when required.

Machike-TaruJabba (White Oil Pipeline Project) was structured on fast track basis under BOOT model. In a short span of 8 months, ISGS completed the Feasibility Study, Basic engineering design, acquired ROW, and successfully completed the PPRA compliant tendering. The bid received would have saved billions of Rupees when compared with present trucking while ensuring safety and security of oil supplies and reducing congestions and road accidents. However, the ECC decided to let the project be developed by the private sector. In compliance with the policy decision by government, the Project was dropped.

The ISGS presently is also working with Gazprom for developing feasibility study of an offshore gas pipeline as well as developing feasibility study with the assistance of ADB for the Strategic Underground Gas Storages. The ISGS has already contacted companies from Russia, Europe, and China who have expressed keen interest in building storages with 100% investment. However, he skipped the question about the expulsion of may officials from ISGS to justify his presence as MD of the company who failed to make money and launch any project.