PNG Prime Minister Peter O’Neill is facing a no-confidence motion as early as next week. AP
Angus Grigg, Lisa Murray, Angela Macdonald-Smith | Australian Financial Review | May 1, 2019
Moves to oust Papua New Guinea Prime Minister Peter O’Neill over claims of financial mismanagement threaten a $16 billion gas deal agreed by Australia’s Oil Search just three weeks ago.
In the biggest challenge to his almost eight years in power, Mr O’Neill is set to face a no-confidence vote after Parliament resumes next week as key allies abandon his ruling coalition.
Mr O’Neill has brought stability to the often fractious world of PNG politics, but the opponents are now pledging to review the LNG deal he signed and investigate allegations of corruption and abuse of process.
Any review of the Papua LNG project being developed by Oil Search and its partners, ExxonMobil and France’s Total, would see renewed scrutiny of the so called “UBS loan affair”, whereby the Australian arm of the Swiss bank advanced the PNG government $1.2 billion. The deal was championed by Mr O’Neill.
“A big item on the agenda for the new government will be to investigate the UBS loan agreement in its entirety,” shadow attorney-general Kerenga Kua told The Australian Financial Review.
He also warned the Papua LNG partners not to make any further investments in the project as the deal was set to be reviewed.
The move against Mr O’Neill comes at an awkward time for Canberra as it seeks PNG support to blunt China’s influence in the region and continue to house refugees on Manus Island.
“This is the biggest challenge Prime Minister O’Neill has faced,” said Shane McLeod, a research fellow focused on the Pacific at the Lowy Institute.
“It’s not entirely clear who is in control of the numbers, but the move is definitely on.”
The 2014 loan from UBS’ Australian arm to the PNG government is already being investigated by the Swiss regulator after the highly complex deal saw the Pacific nation lose as much as $400 million in just three years after it borrowed the money to buy a 10 per cent stake in Oil Search.
Former Prime Minister Mekere Morauta said the LNG agreement and the “illegal” UBS loan need to be investigated “as a matter of urgency”.
“The two are connected and all the detail needs to be exposed to scrutiny,” Sir Mekere said.
“Neither the Papua LNG agreement nor the UBS-Oil Search loan were in the national interest.”
Opposition figures claim the UBS loan was illegal as it was never approved by Parliament, as stipulated in the constitution.
Oil Search chief executive Peter Botten said any move against Mr O’Neill could delay the final agreement for the $16 billion Papua LNG project, but he doubted it would see the deal scrapped.
“Clearly, if there’s a change of government or whatever in Papua New Guinea that might impact timing, but all sides of politics recognise the importance of this project and the need to move forward given competition from others,” Mr Botten said in Sydney on Tuesday.
“Papua New Guinea has had two prime ministers in the last 19 years. Compared to Australia it’s doing OK. But there are times when political shake-ups happen. This may or may not be the time when it happens but we’ll know over the next week.”
The deal agreed with the PNG government on April 9 sets out the tax and fiscal details of the project.
Oil Search CEO Peter Botten says any change of government in PNG could delay his latest LNG project. Vanessa Kerton
Efforts to topple Mr O’Neill, who came to power in August 2011, have been brewing for months amid claims he has centralised power, and not followed due process.
Mr O’Neill has been rocked by the resignation of two cabinet ministers and an estimated eight MPs from his ruling People’s National Congress.
It had been the largest party with 27 MPs, but Mr O’Neill was still reliant on an often fluid coalition to rule in the 111-seat Parliament.
The opposition is confident momentum is building for a move to roll Mr O’Neill via a no-confidence motion on the floor of Parliament.
But all sides acknowledge Mr O’Neill is highly skilled at forming and retaining coalitions and has the advantage of incumbency to fend off any challenge.
“He’s got plenty of tools at his disposal, like ministries and prominent positions within the government,” said Mr McLeod from the Lowy Institute.
The opposition also lacks a natural leader and at this stage has not said who it would put up to be prime minister if it won the no-confidence vote. This is slowing down the process.
The shadow attorney-general Mr Kua said the UBS loan agreement had “destroyed the integrity, image and trust in this government”.
“We need to look at all the terms and conditions, whether fees were paid at a commercial rate and all the boxes were ticked before we can come to our own view about whether the loan approval went through a proper process.”
In 2014, PNG borrowed $1.24 billion to purchase a 10 per cent stake in Oil Search, which was developing natural gas assets in the PNG Highlands. The PNG government’s stake then allowed Oil Search to purchase a 23 per cent interest in the Elk-Antelope gasfields, the resource that will supply the Papua LNG project.
Oil Search and Exxon along with Australia’s Santos are also shareholders in the $25 billion PNG LNG project, which began production in 2014.