October 18, 2019 / 12:40 AM / a month ago

Papua New Guinea delays inquiry into UBS loan for ill-fated Oil Search stake

Oct 18 (Reuters) - Papua New Guinea has delayed an inquiry that was due to begin this week into the terms of a A$1.2 billion ($819.00 million) loan from Swiss bank UBS that was used for an ill-fated government investment in the gas sector.

The commissioner for the inquiry, Salamo Injia, blamed slow-moving government officials for the delay, saying they had failed to appoint an overseas legal team as ordered by Prime Minister James Marape last month.

Injia, a former chief justice, said in an email late on Thursday that he was "hopeful" the relevant government agencies would prioritise the task so public hearings could begin on Nov. 4.

The government-backed inquiry is looking into how the UBS loan was used by the government to buy a 10% stake in PNG-focused energy firm Oil Search in 2014 under former prime minister Peter O'Neill.

Marape, who was finance minister at the time of the deal, set up the inquiry shortly after taking over as leader in May. He last month agreed to requests from Injia and ordered that the length of the investigation be doubled to six months, its budget increased and an international law firm appointed.

Retired Australian judge John Gilmour has already been appointed as a second commissioner and Injia has requested an Australian firm of solicitors be appointed "given the international dimension of the subject matter."

The UBS loan was handled by the firm's Australian offices.

Oil Search has a near one-third interest in the Exxon Mobil -led PNG LNG Project, where gas is extracted from PNG's highlands region.

Questions were immediately raised 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.

UBS did not immediately return an emailed request for comment on Thursday. 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. ($1 = 1.4652 Australian dollars) (Reporting by Colin Packham; editing by Jane Wardell)

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