PNG drops sovereign wealth fund plans: report

Papua New Guinea appears to have dropped plans to create a sovereign wealth fund to finance its purchase of a stake in gas company Oil Search after Australia backed the fund with aid money, The Australian Financial Review reports.

According to the newspaper, revenue from the PNG liquefied natural gas project, which was supposed to flow into the wealth fund, will now be pledged as collateral for the $1.3 billion purchase of a 10.1 per cent holding in Oil Search.

The two countries inked a 2009 agreement saying PNG would provide advice to Australia about the objectives of the sovereign wealth fund and Australia would offer assistance on how to establish a fund.

Prime Minister Tony Abbott is visiting PNG but the AFR reports he is unlikely to discuss the fund on this visit as talks about the Manus Island refugee processing centre take precedence.