A Papua New Guinea government plan to buy shares in Oil Search has hit a hurdle after the country’s ombudsman ordered it to freeze a billion dollar-plus bank loan deal.
Chief ombudsman Rigo Lua made the directive on March 14, just days after PNG Prime Minister Peter O’Neill sacked treasurer Don Polye.
The proceeds of the $A1.3 billion loan, facilitated by investment bank UBS, were earmarked to buy back a 10 per cent stake in the country’s oil and gas producer Oil Search Ltd.
“The Ombudsman Commission is not asserting that there are irregularities involved, nor does it want to interfere with any development initiatives of the national government, but to ensure compliance with all relevant laws,” Mr Lua told the locally based Post Courier newspaper.
The commission will now investigate the circumstances surrounding the loan and is expected to summon government officers.
Mr Polye has said he refused to sign off on the loan because there was no guarantee it directly benefited PNG.
He also said the loan – equivalent to three billion PNG kina – would be added to the nation’s eight or nine billion kina debt.
“So we will see our debt level go up through the roof,” he told Radio New Zealand last week.
But Mr O’Neill says the government must own shares in Oil Search, which is one of PNG’s largest investors and its biggest employer.
PNG gave up its stake in Oil Search in 2009.
The sale to the Abu Dhabi-based International Petroleum Investment Company was conducted so it could raise funds to buy shares in the $US19 billion ($A20.86 billion) PNG Liquified Natural Gas Project (PNGLNG), due to go online later this year.
Opposition leader Belden Namah said the ombudsman had done the right thing in halting the loan.
“This arrangement was clinically and surgically done for the prime minister’s own interest,” he told the Post Courier.
“The PM is a ticking time bomb, a constitutional and economic terrorist.”
The government has yet to comment on the ombudsman’s decision.