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PNG Prime minister explains the necessity of the UBS loan

Papua New Guinea Prime Minister Peter O’Neill Tuesday explained the UBS loan deal which he claimed was a legacy issue inherited from the former Somare government.

He was answering a question from the alternate government’s Shadow Treasurer Ian Ling Stuckey.

“The saga on the issue of the UBS loan came about because we wanted to secure our interest in Oil Search when the Oil Search shares were mortgaged by the Somare government to borrow money from IPIC to fund the 19.1 per cent stake in the PNG LNG project,” he said.

O’Neill said IPIC is a sovereign wealth fund (SWF) controlled by the royal family and government of United Arab Emirates (UAE) when PNG government officials at that time went to mortgage the shares and borrowed the money to pay for shares in PNG LNG project.

“I think AUD$1.6 billion (US$1.1 billion), they not only mortgaged Oil Search but they borrowed (against) every state-owned enterprise (SOEs) of this country. So, if we want to sell one of the planes in Air Niugini, we have to ask the permission of the Arabs, if we wanted to sell one of the buildings in any of the SOEs, we have to ask the Arabs, literally we were mortgaged to the Arabs,” O’Neill said.

He said IPIC lacked a transparent and accountable reporting structure.

“This is the same company that was involved in the US$1 billion scandal in Malaysia, now before the courts.”

O’Neill said the PNG government did the deal with no accountability, and transparency.

“When the five-year term loan was due, the arrangement was that they would surrender the assets back to PNG and we would pay them back the money owed so we can secure our 10.1 per cent in Oil Search.

“But when the time came for them to release the shares back to us, we had to find the money to pay for the shares, so treasury negotiated and secured the funds.

“We told IPIC that we want our shares back we will pay you the money but they refused to return, which is an option which they exercise — which is fair enough — but treasury officials said the Oil Search investment is a strategic investment for government.”

He said OSL is one of the biggest investors and the government could not afford to let them take their money and invest elsewhere, hence the UBS deal.


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