November 4, 2019 / 6:31 AM / 17 days ago

Papua New Guinea again delays probe into UBS loan for Oil Search stake

MELBOURNE, Nov 4 (Reuters) - Papua New Guinea on Monday indefinitely delayed an inquiry into the terms of a A$1.2 billion ($830 million) loan from Swiss bank UBS that the government used to fund an ill-timed investment in an oil company.

The inquiry’s chairman, Salamo Injia, who had previously delayed a first hearing from October to Nov. 4, said on Monday the commission has yet to line up the funding it needs as well as foreign lawyers to work with the commission.

“Until these and other outstanding administrative arrangements are completed by the government agencies and officers concerned, this Commission is unable to sit today and is unlikely to sit any time soon,” Injia said in a statement.

If the commission was unable to give an update on funding and the legal team by the end of November, it would announce on Dec. 16 plans for the inquiry for early 2020.

The government-backed inquiry is looking into how the UBS loan was used by the government to buy a 10% stake in PNG-focused oil and gas producer Oil Search Ltd in 2014 under former prime minister Peter O’Neill.

Prime Minister James Marape, who was finance minister at the time of the deal, set up the inquiry shortly after taking over as leader in May.

In September, Marape agreed to requests from Injia to double the duration of the inquiry to six months, increase its budget and appoint an international law firm to assist, but the funding has yet to be released and a tender for appointing a law firm has yet to be completed.

Marape’s office did not immediately respond to a request for comment on the delayed inquiry.

The UBS loan helped PNG buy a 10% stake in Oil Search in 2014, which helped the company pay for a holding in the country’s biggest undeveloped gas field, Elk-Antelope.

The government bought the stake just before oil prices crashed and Oil Search’s shares fell.

Hit by the commodities slump, the cash-strapped country had to refinance the loan and eventually had to extinguish the debt by giving up the shares to the banks that arranged the loan.

UBS, which handled the loan through its Australian offices, on Monday declined to comment on the delay, but has previously said it welcomed the inquiry.

The bank said in July the report by PNG’s ombudsman that led to the inquiry had made no findings against UBS and that the government had relied on independent financial and legal advice before investing in Oil Search. ($1 = 1.4451 Australian dollars) (Reporting by Sonali Paul; editing by Richard Pullin)

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