Papua New Guinea to investigate terms of UBS loan
Papua New Guinea will start preliminary hearings on Sept. 19 into the terms of a A$1.2 billion ($810.5 million) loan from Swiss bank UBS (UBSG.S) used for an ill-fated government investment in the gas sector, the inquiry’s chairman said on Monday.
The timetable and terms of reference, released for the first time, also include a focus on how the UBS loan used to buy a government stake in PNG-focused energy firm Oil Search (OSH.AX) was obtained, whether it resembled previous loans, and whether the government broke its own rules in taking out the loan.
Chairman Salamo Injia, a former chief justice, said in a statement on Monday that retired Australian judge John Gilmour would also join the inquiry as a second commissioner.
“The appointments of [an] overseas commissioner and counsel were necessary given the international dimensions of the UBS transactions,” Salamo said.
In 2014, the PNG government wanted to expand its exposure to the country’s emerging gas industry by taking a 10% stake in Oil Search. Peter O’Neill was PNG’s prime minister at that time. O’Neill resigned in May.
Oil Search Limited has a near one-third interest in the Exxon Mobil(XOM.N)-led PNG LNG Project, where gas is extracted from PNG’s highlands region.
Questions were immediately raised in 2014 over whether the deal was overly complex, and if the PNG government followed correct legal procedures, sparking various internal inquiries.
The cash-strapped government went on to sell its stake after a prolonged period of weak oil and gas prices. The total sum of the financial loss has never been disclosed by the government.
PNG’s new prime minister, James Marape, set up a new, powerful inquiry shortly after taking over as leader in May. He previously said the government had asked for an investigation to be concluded within three months.
Marape was finance minister at the time of the deal.
UBS did not immediately return an emailed request for comment.
It has previously said it would not comment on specific transactions and that it adhered to strict standards in banking operations.
Swiss financial watchdog FINMA said in March it was in contact with UBS about the loan.