Papua New Guinea loan for Oil Search shares blocked -report

MELBOURNE, March 25 Mon Mar 24, 2014 6:42pm EDT

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MELBOURNE, March 25 (Reuters) - An independent commission has blocked the Papua New Guinea government from taking up a A$1.2 billion loan it lined up to buy a 10 percent stake in PNG oil and gas producer Oil Search, Radio New Zealand reported on Tuesday.

PNG's Ombudsman Commission has frozen the loan while it investigates whether Prime Minister Peter O'Neill followed all the correct legal procedures in deciding to borrow the money, Radio New Zealand's PNG correspondent said.

In February, O'Neill approved plans for the government to buy new shares in Oil Search, giving it just over a 10 percent stake for A$1.2 billion. That allowed the government to gain a new stake in Oil Search after it gave up a bigger holding to Abu Dhabi in a A$1.68 billion convertible bond deal.

The move to borrow $1.2 billion from UBS was opposed by former treasurer Don Polye, who said it breached budget guidelines and was done without approval from parliament. Polye was dumped by O'Neill earlier in March.

Oil Search sold the shares to the government to fund a $900 million acquisition of a stake in PNG's biggest undeveloped gas fields, the Elk and Antelope fields. The share sale and deal were completed earlier in March.

A PNG government official was not immediately available to comment on what could arise out of the Ombudsman Commission's investigation. (Reporting by Sonali Paul; Editing by David Gregorio)

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