Political turmoil continues in PNG

PNG Prime Minister Peter O'Neill says is stepping down. Source: AAP

The horse trading is underway in PNG as outgoing Prime Minister Peter O'Neill tries to keep his government in power as the opposition pursues opposite plans.

More political turmoil is expected in Papua New Guinea as Prime Minister Peter O'Neill prepares to step down and opposing political camps fight for control of the government benches and the right to choose a new leader.

O'Neill, who has been in power since 2011, is expected to visit the governor-general and officially resign as early as Tuesday.

He has nominated former prime minister Julius Chan, 79, to take over.

But whether Chan takes the top job for the third time depends on how the parliamentary numbers shake down in coming days.

Government and the opposition bloc will be fighting to attract the most MPs, with a lot of horse trading and dangled enticements expected.

A string of ministerial resignations and MP defections forced O'Neill to announce he would step down when the numbers swung against him on Friday, threatening defeat in a confidence vote on the floor of parliament.

But he's fighting to ensure his government continues in power, hoping the leadership change will attract MPs back from the opposition bloc.

"I am very confident that we will maintain a majority when we resume parliament on Tuesday," O'Neill said.

"Largely because those who wanted a change, now have been offered a change."

But the opposition bloc, calling itself the "alternate government", maintains it has 63 MPs, easily outnumbering government members in any parliamentary vote and giving it the right to choose the new prime minister.

The opposition has yet to announce who its candidate for PM will be.

Meanwhile O'Neill has filed a court challenge against any looming vote of no confidence in him, sparking speculation he is dragging things out to buy time to win back support and even stay in power.

Under parliamentary rules a no-confidence motion wouldn't go to the vote for more than a week.

Key defector and former finance minister James Marape said the opposition bloc would take control in any case.

O'Neill said the continuation of his government was necessary so it could "continue to deliver its reform agenda" for the people of PNG.

But the defectors from the government allege O'Neill was a dictatorial leader and have raised concerns about the distribution of wealth from PNG's oil and gas resources projects.

Under scrutiny is O'Neill's involvement in a $A1.2 billion loan through finance group UBS for the government to buy a 10 per cent stake in Australian Stock Exchange-listed firm Oil Search which used the money to buy into the Elk Antelope gas field being developed by France's Total.

A report by the Ombudsman Commission of PNG criticising the 2014 deal and its lack of returns for Papua New Guineans is scheduled to be tabled in parliament next week.

Australian Foreign Minister Marise Payne is confident Canberra will maintain a good relationship with PNG no matter who leads the Pacific nation.

"Obviously, these are matters for the Papua New Guinea parliament and political parties and we will work with the leadership as it is determined by them," she told ABC Radio on Monday.

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