The player hadn't told Lancashire he would be on the list of those hoping to be picked for a lucrative spell in the Twenty20 competition.
While Lancashire team-mate Andrew Flintoff and Kevin Pietersen are certain to be bought by one of the eight franchises in Friday's mega-bucks auction, Mahmood seems unlikely to with 112 non-Indian players battling it out for around 11 overseas slots.
If the Bolton-born bowler does get selected, however, Lancashire face a difficult decision over whether to allow their main strike bowler to potentially miss the opening six weeks of the new season, especially with Flintoff out of the side and England commitments restricting Jimmy Anderson's availability.
The club allowed overseas player Brad Hodge to join the Kolkata Knight Riders last year at very short notice, disrupting their early-season plans.
"We will wait and see if Saj gets an offer," said director of cricket Watkinson. "Then we will chat with him and decide what is the best move.
"We will have to decide if it is good for us and for him to go.
"But I have no issue with his name being on the list. There are many parties involved, with agents representing Saj and some saying they represent Saj. I have spoken to him and we are fine."
Mahmood, who is in the final year of his contract at Lancashire, is preparing with the England Lions ahead of their tour of New Zealand later this month.
Meanwhile, Lancashire chairman Michael Cairns has launched a blistering attack on the ECB, and its chairman Giles Clarke.
Lancashire are publicly backing Lord Marland in his election battle with Clarke, who is bidding for a second term as chairman.
Debacle
And in a letter sent to all counties, Cairns is reported as saying Clarke should have resigned for his part in the Kevin Pietersen/Peter Moores saga.
"In the past year we have seriously fallen out with the Indians, the Australians have failed to join us and voted against us for the first time in history," Cairns writes.
"We have the Allen Stanford debacle and to cap it all off the Pietersen/Moores saga bringing with it unfortunate public awareness of a split in the dressing room, which was symptomatic of the lack of a firm grip at the very top of the ECB management chairman and chief executive on the affairs of English cricket.
"Their dereliction of duty was an embarrassment to English cricket for which the chairman at the top of the management structure must take the responsibility. Indeed he should have resigned of his own volition when the new captain was appointed."
And Cairns also criticises the decision of the ECB to sign up with Sir Allen Stanford.
"I fail to understand how the decision to enter into a fairly long-standing contract with Sir Allen Stanford can be considered beneficial to either our game or reputation going forward," he wrote.
ENGLAND are hopeful Andrew Flintoff will be fit for the first Test against the West Indies, which starts in Jamaica on Wednesday.
The Lancashire all-rounder will test his sore side today before a decision is made.
Assuming Flintoff is fit, Old Trafford team-mate Jimmy Anderson looks to be vying for a place in the side with Steve Harmison.
THE International Cricket Council have reversed their decision to record the controversial 2006 Oval Test between England and Pakistan as an abandonment and formally handed victory back to England victory.
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