PNG's PM O'Neill avoids arrest

Papua New Guinea Prime Minister Peter O'Neill has reportedly avoided arrest after being served with a warrant by the country's anti-corruption watchdog.

Fraud investigators want to quiz Mr O'Neill over allegations he personally authorised an illegal payment of about $31 million to law firm, Paul Paraka lawyers.

But the Prime Minister refused to leave PNG's parliament on Monday and instructed lawyers to try and stay the warrant for his arrest, according to the PNG Post-Courier newspaper.

The case was being heard on Monday night (AEST).

AAP is seeking further comment.

Mr O'Neill issued a statement denying the allegations against him, which were first raised last year, when Opposition Leader Belden Namah produced a letter allegedly bearing Mr O'Neill's signature and authorising the payments.

In January, Task Force Sweep announced Mr O'Neill had no case to answer following interviews with staff at the Prime Minister's Office, as well as checks of their outgoing correspondence register.

Also in January, the Opposition produced three National Court warrants for Mr O'Neill's arrest over the affair, however the government successfully had them overturned.

The Paul Paraka affair - called Parakagate in Port Moresby - is one of PNG's longest running fraud investigations.

Mr Paraka, one of the most powerful lawyers in PNG, was arrested and charged in 2013 for allegedly receiving the state monies.

Task Force Sweep alleges the payments were spread over a seven-year period and ran into the "hundreds of millions".

In May last year, Mr O'Neill threatened to sack everyone in his finance department over the alleged scam involving top officials and lawyers.

Mr O'Neill commands a huge majority in PNG's single house of parliament, with roughly 95 out of 111 MPs supporting his government.