Inside ISGS; where public balance sheet keeps absorbing the burn of stalled projects

Inter State Gas Systems (Private) Limited sits at an awkward place. It is an intersection of Pakistan’s energy ambition and our woefully gloomy fiscal reality. 

On paper, it is the state’s nominated vehicle for projects that, if delivered, would reshape the country’s gas supply map, with projects like the Iran–Pakistan (IP) pipeline, the Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline, and other associated strategic gas infrastructure etc. 

In practice, however, the company has become a case study in how “strategic” can turn into “indefinite”. A project-centric entity with years of development costs, recurring overhead, and repeated governance controversies, all while the core projects remain exposed to sanctions risk, geopolitics, and policy drift. 

Recently this company is facing serious internal upheaval amid allegations of arbitrary decision-making by its Board of Directors, particularly its Chairman. With 20 employees terminated and unprecedented downsizing, which was previously unheard of in a company like ISGS, the company is in deep waters.

These latest claims of board-level arbitrariness, and terminations in leadership churn go directly to the question of what Pakistani taxpayers keep paying for, often indirectly. The question is what exactly is it that the state is buying when it keeps funding an entity that has no operating revenue but continues to incur costs?

What ISGS is supposed to be, and why its structure matters

First and foremost, what is ISGS? Incorporated as a private limited company under Pakistan’s companies law framework, and mandated to oversee the import of transnational gas pipelines and related strategic gas infrastructure, ISGS promises quite a transformation. 

But to understand what ISGS is, it is important to understand what it is not. ISGS is not a private-sector venture, it is not a direct government project, and it is most definitely not a public limited company.

It is effectively a state vehicle, incorporated as a private limited company. It is wholly owned by Government Holdings (Private) Limited (GHPL) and has an authorised share capital of Rs20 billion. GHPL itself is a state-owned entity that manages major upstream oil and gas holdings for the government. It is governed by a 9-member Board of Directors and managed by a Managing Director, under the administrative oversight of the Petroleum Division of the Energy Ministry.

And to be clear, this legal form is not cosmetic in nature. ISGS is a company because a private company can be run with a tighter governance perimeter than a line ministry directorate, or a sub-division. It can hire market-facing specialists, and can negotiate with foreign counterparties and lenders with a more familiar corporate wrapper, and therefore justifying its corporate structure. 

This ownership chain matters because it determines who bears risk when projects stall. GHPL is part of the state’s wider SOE footprint; when entities in that footprint accumulate losses or require fiscal support, the cost ultimately lands on the public balance sheet, through the federal budget, resulting in surcharges and levies on consumers, or deferred liabilities that become tomorrow’s fiscal problem.

A World Bank assessment of Pakistan’s federal SOE footprint has also listed ISGS within the government’s ownership ecosystem, reflecting the state’s controlling shareholding and the way ISGS is treated in public-sector performance mapping. 

The pipeline promise: what ISGS manages, in concrete terms

The scale of ISGS’s mandate is easiest to see through the headline specifications of the projects it is tasked to advance.

TAPI, for example, is designed to bring gas from Turkmenistan’s Galkynysh field through Afghanistan into Pakistan and onwards to India, with ISGS describing transport capacity of up to 33 billion cubic metres per year (about 3.2 billion cubic feet per day) over a 30-year supply period. 

On the Pakistan Stream Gas Pipeline (previously framed in many discussions as a North–South gas pipeline concept), ISGS’s role is similarly foundational: it is the Pakistani nominated entity in the project’s implementation structure. A London Stock Exchange document describing the Pakistan Global Sukuk Programme referred to a special purpose structure where the Russian nominated entity would hold not less than 26%. That project however, remains stalled primarily due to critical security risks in Afghanistan, significant financing gaps, and, to a lesser extent, regional geopolitical tensions between Pakistan and India, both party to the agreement.

And on the Iran–Pakistan pipeline, the state has periodically signalled urgency driven by legal and geopolitical constraints. In early 2024, Pakistan’s petroleum authorities announced approval for work on an 80-kilometre segment of the pipeline on the Pakistani side, explicitly stating the project would be executed by ISGS and funded through the Gas Infrastructure Development Cess (GIDC). However, global politics and legal issues did not see that plan bear fruit. 

That one line, “funding through GIDC”, captures why ISGS governance is not an abstract boardroom issue. GIDC is, in effect, a levy mechanism tied to the energy system. When it is used to finance pipeline work, consumers and the broader fiscal apparatus are underwriting an asset that may or may not reach commercial operations. An opportunity cost that the entire country bears.

And since the major projects under ISGS’ purview can not see much progress, that fund remains to be distributed in other various ways.

Company financials

Before diving deeper into the corporate structure of ISGS and its vulnerabilities, it is important to look at how the company is doing financially. 

Though difficult to acquire, the company’s financials tell a story of rot and executional limbo. The Inter State Gas Systems (Private) Limited (ISGS) continues to reflect a project-centric balance sheet with no operational revenue, underscoring the stalled status of its core undertakings, particularly the Iran–Pakistan (IP) Gas Pipeline Project. 

The capital work in progress related to the IP project has remained unchanged at Rs 2.232 billion in both 2024 and 2025, indicating no material progress during this year. As a matter of fact, the same figures were quoted in ISGS’ financials from over 5 years ago. 

Meanwhile a significant portion of accumulated costs relates to engineering, project management, and preparatory activities, while impairment losses remained substantial. 

The IP Gas Pipeline Project impairment stands at Rs 278.7 million, and the impairment loss linked to the Gwadar–Nawabshah LNG project is Rs 553.9 million, collectively highlighting persistent uncertainty over the recoverability of these long-term investments, said sources, adding,” The absence of movement in these figures suggests that strategic, geopolitical, and financing constraints continue to weigh heavily on project execution”.

Sources further said that ISGS recorded a net loss of Rs 933.4 million for the year ended June 30, 2025, sharply higher than the Rs 353.5 million loss reported in the previous year. They said the widening loss is primarily driven by administrative and project development expenses, which surged to over Rs 1.0 billion, reflecting ongoing overheads despite the lack of revenue-generating activity. 

And although other income showed a marginal increase, it was insufficient to offset rising costs and the company’s share of losses from joint ventures. The results point to a structurally weak financial position where recurring expenses, finance costs, and project impairments continue to erode equity, reinforcing concerns over the sustainability of ISGS operations in the absence of policy clarity and tangible progress on its flagship gas infrastructure projects.

The boardroom struggles, and the overheads

What its unique corporate structure affords ISGS is, discretion. Discretion in decision making and discretion in how it utilises its funds that are pretty much public property. Transparency is neither a requirement nor a tradition at the ISGS. 

For two months, the company website, which even has a “financials” section, has been consistently down, limiting access to financial data for everyone. The company has also had leadership struggles, political involvement and policy discontinuity. 

For example, Dr. Hassan, a Lahore-based chartered accountant, was first appointed to the ISGS Board of Directors in October 2019 for a three-year term during the Pakistan Tehreek-e-Insaf (PTI) government. Following the change in government, he not only retained his position but also secured another three-year term, reportedly due to close personal relations with the then federal petroleum minister, Mussadik Malik. He is now serving his sixth year as Chairman, Board of Directors, making him the longest-serving chairman in the company’s history and one of many BOD's at the Petroleum Division. 

And he is not the only one. As per the sources, the ISGS Board allegedly remained largely inactive for nearly five years, during which period board members continued to draw fees. It is important to note here that the Chairman and other members of the ISGS Board of Directors receive Rs 100,000 per board meeting or sub-committee meeting. In fact, the ISGS Board and its sub-committees alone cost the national exchequer approximately Rs 26 million during the last fiscal year, just to meet.

The board comprises nine members, while the company itself employs around 20 personnel. This raises questions about proportionality, efficiency, and governance oversight as per sources from inside the ministry. It was revealed that board members have been rating each other “excellent” over the past six years, despite growing criticism regarding the board’s overall performance and strategic direction or a lack thereof.

And this inefficiency reflects on the company’s ability to perform its basic tasks. It was learnt from sources that the BOD has allegedly failed to give any professional feedback or expertise on the Underground Gas Storage project which had seen considerable work undertaken, after approvals of the said BOD, only to be halted later. The BOD also did not offer any direction on the multi billion TAPI and IP gas pipeline projects and has remained in a status quo position, increasing risk factors, noted the sources.

Industry sources also described the current ISGS Board as having failed to provide meaningful professional direction to the company during its nearly six-year tenure. However, in the face of financial loss and to answer growing concerns, the ISGS board recently decided to terminate several employees in the name of “rationalisation”.

As a result, 20 employees were terminated, while two others resigned pre-emptively in anticipation of the process to secure alternative employment. The former Managing Director and CEO, Nadeem Javed Bajwa, also quit, a matter that has since escalated into a legal dispute. Mr. Nadeem Javed Bajwa, too, failed to initiate or launch any meaningful projects during his tenure as MD. He was selected for the position due to his private sector background, but his performance remained sub par. Sources indicate him disinterested in his job, working on his private business and remaining out station while continuing to draw a hefty salary package from national exchequer.

In several legal disputes, the employees argued that, if downsizing was unavoidable, they should have been adjusted in other state-owned enterprises (SOEs) under the Petroleum Division, which oversees nearly 15 such entities. Many of the affected employees had left secure jobs elsewhere to join ISGS with the expectation of a long-term public-sector career.

And that reveals the extent to which ISGS is a private company. An inane public sector rationale plagues Pakistan’s energy economics and that very mindset, no matter how corporate, is leaching off of GIDC, a fund that was meant to initially turn their high gas bills into long-term energy security.

Under the Gas Infrastructure Development Cess Act, 2015, the cess is levied on gas consumers other than domestic sector consumers at rates set out in the Second Schedule; gas companies bill, collect, and remit it to the Federal Government. The same Finance Division summary of Section 4 states the cess is to be utilised by the Federal Government for or in connection with infrastructure development of the Iran Pakistan Pipeline Project, the TAPI Pipeline Project, and LNG or other ancillary projects.

Who is the real culprit

One look at the company financials makes it almost paramount to argue the rationality of the entire operation, but what is more striking is that the board members, unlike other private enterprises, are immune to getting the axe, which is perhaps the reason why none of the comments on them were positive.

And these members are not (all) average bureaucrats. The ISGS Board includes prominent members such as Dr. Akbar Zaidi, Executive Director at IBA Karachi, Aamir Yousafzai from Balochistan, Shehryar Akbar, Masood Nabi, Arifullah Khan, Deputy Secretary, Petroleum Division, and A. Rasheed Jokhio, Director General (Gas), Petroleum Division.

The financial reports and Profit’s sources indicate that the learned BOD has never raised any concern or expressed apprehension over continuing to sanction money from the public exchequer in lieu of ISGS project expenses running into billions of rupees.

It is indicative of a pattern where the BOD has sought to justify its long tenure and performance by sacking employees, whereas it continued to approve capex and opex expenses to the tune of billions of rupees. Statements of members indicate that over Rs. 2 billion were sanctioned by the BOD for expenses related to IP pipeline, alone. Whereas Rs. 16 million have been spent so far on BOD fees thus far in this year.

It is clear that there lies a discontentment between the members of the staff and board members of the company, as was revealed by our source. But who does one blame? The staff that comes with an intrinsic expectation of stability to a private company, despite not doing any work? Or a board of directors that enjoys government job perks and thrives off of rating each other perfectly despite none of them having done an honest day’s work in six years?

The answer to that question is difficult, because the one thing that our sources in, or close to this company fail to expound is the fact that the company has failed to comply with any actionable indicator of what work it has done in the last 5 years, and thereby justify the employability of any single one of its people.

And that is the crux of our problem. The company, in a complex corporate and ownership structure, is incurring losses over projects that either cannot be done due to geopolitical or legal reasons. This means that any staff member, at the moment, apart from, perhaps the legal team (which itself is outsourced for Rs 350 million) in its Iran-Pakistan arbitration, is as redundant as the next one. Then why does it still need to be run as a separate enterprise after all this time? 

Who “the real culprit is”, fails to matter after a point where the company’s sentience and a corporate existence start becoming a burden. The fact is that this company can be run as a different entity in a much leaner fashion and still achieve all that it has been able to achieve in the past 5 years, (which is nothing of note).

One important example here is that employees express their discontentment with Dr. Ibne Hassan, the current chairman, and said that he had earlier served on the Board of Directors of Pakistan Petroleum Limited (PPL). Individuals familiar with his tenure at one of the country’s largest exploration and production companies went as far as alleging that decisions taken during the closing months of his term resulted in large-scale termination of skilled manpower, leaving what they describe as a “lasting damaging impact” on the organisation. And a similar pattern has now emerged at ISGS, they added.

But what the sources fail to answer is, how will the loss of any manpower impact ISGS? PPL still generates money; what does ISGS generate? For taxpayers, the relevant metric is not merely whether headcount was trimmed, but whether the organisation has converted years of expenditure into bankable project milestones, credible financing paths, and enforceable delivery schedules.

Against this backdrop, a detailed questionnaire was also sent on December 16 to the Federal Minister for Petroleum and the Chairman of the ISGS Board of Directors, seeking clarity on board tenure, performance evaluation mechanisms, governance standards, the treatment of terminated employees, board size and associated costs, and the government’s broader policy direction for ISGS, an entity declared strategic and highlighted in SIFC and Uraan Pakistan documents. Despite repeated reminders, no response had been received at the time of filing this report.

Who wins and who bears this cost?

The most visible taxpayer exposure is the company’s own overhead and development spend. But the more consequential exposure sits outside ISGS’s accounts, in how Pakistan’s broader energy-sector fiscal stress compounds the cost of stalled infrastructure.

Pakistan’s Finance Division has reported large and rising fiscal support to SOEs, figures in the trillions of rupees in recent fiscal years, driven heavily by energy-sector liabilities and circular debt management. Even if ISGS is not among the largest SOE loss-makers, it operates inside the same fiscal ecosystem. One where the government repeatedly absorbs costs because structural problems prevent financially sustainable operations.

Pakistan’s own Fiscal Risk Statement has described the combined circular debt of the power and gas sectors running into trillions of rupees (Rs4.7 trillion as of December 2024), framing it as a macro-fiscal risk with implications for debt dynamics. When the energy system is already carrying that level of debt overhang, continued spending on stalled pipeline entities becomes harder to justify. Because every rupee tied up in non-performing projects is a rupee not reducing the system’s broader liabilities.

Moreover, the state has had to pursue large-scale financing arrangements to manage energy-sector debt stress, including multi-bank facilities aimed at easing circular debt pressures.

This matters in the context of ISGS because it highlights a fiscal environment in which “strategic projects” compete with immediate debt servicing, subsidies, and liquidity crises. The opportunity cost of the governance failure in one node of the energy system does not remain isolated; it worsens system-wide fragility.

This long-run deterioration is not only about individual decisions. It is also about the widening gap between what Pakistan’s governance framework now expects and what many SOE-linked entities appear able to deliver.

Pakistan enacted the State-Owned Enterprises (Governance and Operations) Act, 2023, which places explicit responsibilities on boards, business planning, published statements of corporate intent, and clearer performance and accountability mechanisms. The Finance Division’s SOE Ownership and Management Policy also sets out governance expectations around board composition, internal controls, and performance orientation.

In parallel, the SECP’s public sector corporate governance rules establish frameworks for board oversight, internal controls, audit committees, and governance compliance expectations across public sector companies.

Against that direction of travel, toward measurable performance and transparent accountability, ISGS’s core problem looks more acute. The company’s deliverables are constrained by geopolitics (sanctions risk on Iran, security risk on Afghanistan transit routes), yet its governance costs and overhead are domestic and recurring.

When projects like this stall for reasons outside management’s control, the board’s job becomes even more critical: to minimise wasted spend, preserve institutional capability, and maintain a credible “go / no-go” policy framework that prevents perpetual limbo. And with a board that is largely inactive on strategy while pursuing terminations late in tenure, it becomes a hazard.

Whether or not every allegation by Profit’s sources withstands scrutiny, this is the pattern. A cycle where entities with no revenue continue to consume public resources while key decisions are deferred, and then politically framed “reforms” arrive in the form of rightsizing rather than the delivery of actual service.

Beneficiaries in such structures are rarely straightforward “winners,” but there are predictable beneficiaries, showing that it's an incentive structure that does not inspire efficacy. First and foremost,  the boards and senior governance actors benefit from continuation because continuity preserves fees, influence, and the ability to control financial spend. Similarly, external advisers and consultants can benefit in prolonged pre-execution phases, where legal, technical, and transactional work continues without reaching construction completion. And of course the ministries themselves can benefit politically from keeping projects alive on paper, because formally cancelling strategic projects can trigger diplomatic, legal, and reputational costs.

The losers, on the other hand, are not as easy to map. There are far too many of those and on far too many levels. People like the skilled staff are exposed to instability and at risk for losing their jobs, the energy system itself which loses optionality, in some ways the reigning government. But the biggest loser of all is the taxpayer and energy consumer. The person who bears the costs through fiscal support mechanisms and levies that finance infrastructure work, even when projects do not reach service delivery. 

The petroleum ministry’s statement that Iran-Pakistan gas pipeline work would be funded through GIDC is a direct example of how costs can be socialised, but benefits remain privatised.