Papua New Guinea PM clings on but government defeated in parliament

By Tom Westbrook and Sonali Paul

SYDNEY/BRISBANE (Reuters) - The government of Papua New Guinea appeared to be in danger on Tuesday, after opponents of Prime Minister Peter O'Neill convincingly won a vote in parliament that prepares the way for his removal.

Government benches were noticeably bare at the fiery sitting in the capital, Port Moresby, parliament's first since a string of senior defections cost O'Neill his majority last week.

After a brief suspension amid uproar as tempers frayed over a blocked move to replace the speaker of the house, O'Neill's rivals won a vote to remove his allies from a panel that vets no-confidence motions, seen as a precursor to his ouster.

“We are demonstrating our numerical strength,” William Duma, an MP who emerged as a kingmaker on Friday, when he led his party out of the ruling coalition, told Reuters in a text message.

Duma said the numbers suggested O'Neill's leadership was doomed and Wera Mori, another defector, said a no-confidence motion would be filed on Wednesday, although the next steps were not immediately clear.

O'Neill remains prime minister and has not formally stepped down, despite promising to resign on Sunday.

His spokesman said he would not quit until the Supreme Court decides on the legality of the no-confidence procedure, in a challenge filed by O'Neill that is set to be heard on Friday.

“We don't have numbers but we have time to see if it can change later,” government lawmaker Powes Parkop said in a text message.

The chaos is not unusual in the South Pacific archipelago and has not been a barrier to mining and energy investment in the resource-rich nation.

Yet deepening disquiet over the benefits failing to trickle down has dogged O'Neill and seems to have gained unstoppable momentum, though he has survived previous toppling attempts.

“I don't think they can hold out with numbers this much against them,” said Jonathan Pryke, director of the Pacific Islands program at Sydney think-tank the Lowy Institute.

GAS GO-AHEAD

Analysts say the political turbulence will also delay resource projects on the drawing board, putting a cloud over plans, with oil majors exposed to PNG, Total SA and ExxonMobil Corp, watching closely.

The uncertainty knocked shares in Oil Search Ltd, a partner of the majors in large liquefied natural gas developments there, on Monday.

However the head of another development partner, Santos Ltd, dismissed analysts' concerns that final investment decisions on LNG expansion could be pushed beyond their 2020 targets.

“There's no indication that the PNG government want to delay anything,” Kevin Gallagher, the chief executive of Santos, told reporters at an energy industry conference in Brisbane.

“I'm confident that whoever forms the government or whoever leads the PNG government will continue to support development like we've seen for 10 years-plus now in PNG - very stable government, very development-focused government.”

He declined to predict what would happen with the leadership but said even the opposition was focused on gas development.

“They are very development and growth-focused. So I wouldn't expect any delay.”

He added that he thought the PNG LNG partners, led by ExxonMobil, would be able to stick to a previously flagged schedule to enter preliminary engineering planning for the expansion project within the next few months.