Former PNG prime minister Peter O’Neill charged in fallout from UBS loans scandal
UBS and Santos are set to have their $1.4bn loan scandal dragged back through the Papua New Guinea courts.
UBS and Santos are set to have their $1.4bn loan scandal dragged back through the Papua New Guinea courts after former PNG prime minister Peter O’Neill was charged for allegedly giving false evidence to the country’s royal commission into the affair.
Mr O’Neill, who has denied any wrongdoing over the matter, was arrested by PNG police at the weekend and charged with three counts of giving false evidence to the royal commission in 2021 and 2022, over his denials that he had discussed the $US900m ($1.3bn) loan from UBS, used to buy shares in Oil Search – which is now part of ASX-listed Santos. Charges against Mr O’Neill were one of the key recommendations made by the royal commission, which found he was “centrally responsible” for the UBS loan, which “had no satisfactory justification or rationale”.
The scandal surrounds Santos’s minority stake in the $US10bn ($14.9bn) Papua LNG project, bought from a company controlled by two stock promoters that backed the discovery of PNG’s Elk and Antelope gas fields, tipped as the biggest undeveloped liquefied natural gas project in the impoverished nation.
As part of the complex translation, in 2014 the PNG government borrowed cash from UBS, and used the money to buy Oil Search shares. Oil Search, in turn, used the cash to buy into the project from a group of companies collectively known as PAC LNG.
Subsequently a plunge in Oil Search shares triggered an effective margin call for PNG, leading to a political crisis, and ultimately costing its government more than $340m – which eventually triggered the fall of the government of Mr O’Neill and the establishment of the royal commission in 2021.
While giving evidence under oath to the commission, Mr O’Neill said he “had no knowledge whatever” of Oil Search’s intention of using money from the share sale to buy into the PNG LNG project.
Mr O’Neill also denied having talks with Oil Search over its plans to use the funds to buy into the project – a position subsequently contradicted by evidence given to the commission by Oil Search executives, including former managing director Peter Botten.
Mr O’Neill was charged on Monday with three counts of giving false evidence to the commission, after a brief formal investigation by PNG police.
He denied knowingly misleading the commission after his arrest.
The commission handed down its damning report into the affair in April 2022, recommending Mr O’Neill face charges for giving false evidence.
Documents given to the PNG courts, seen by The Australian, show that the chief secretary to the PNG government, Ivan Pomaleu, referred the recommendations to PNG police on June 5.
Mr O’Neill’s arrest could also spell trouble for UBS’s Australian arm and for Australian legal firm Norton Rose Fulbright, given the commission also recommended both be banned from doing business with the PNG government and state-owned enterprises.
It is understood that those recommendations have not yet been formally enacted by the current PNG government of Prime Minister James Marape.
Oil Search was taken over by Santos in 2021, and in March 2023 the field’s owners – including Santos, French energy giant Total and ExxonMobil – pulled the trigger on the final round of engineering and design on a $US10bn development of the field, with the partners hoping to make a final investment decision by the end of 2023 and begin construction of the 6 million tonne a year LNG project early in 2024
The move on Mr O’Neill is the second time Santos has been dragged back into the scandal in recent months.
In April it was hit with an application for a freezing order over spoils from its acquisition of the stake in the $US10bn gas project by a company associated the vendors, Swiss financial adviser Carlo Civelli and Texan oil and gas explorer Philippe Mulacek – whose falling out over the spoils of their windfall has already led to years of litigation in the US and Singapore, where as much as $US450m ($670m) tangled up in their business relationship is in dispute.
PAC LNG, controlled by Mr Civelli and Mr Mulacek, sold a 22.85 per cent stake in the Elk-Antelope gas field to Oil Search in 2014, with companies controlled by the men taking away about $US768.5m, or around 85 per cent of the $US900m paid by Oil Search. Minority investors in PAC LNG were paid the rest. Since then the men have been brawling over the proceeds.
That matter is due to return to the Australian Federal Court for a first hearing later this month.
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