Norway's $1 trillion wealth fund turns its back on oil and gas

Norway's $1 trillion wealth fund turns its back on oil and gas

Norway is western Europe's biggest oil and gas producer and its sovereign wealth fund, known officially as the Government Pension Fund, is used to invest the proceeds of the country's oil industry.

But the divestment will focus on companies which trade exclusively in exploration and production like Marathon and Chesapeake Energy rather than the integrated oil giants.

"We were quite surprised to see this and we certainly don't agree with their assertion", said Jon Stringham, manager of fiscal and economic policy for the Canadian Association of Petroleum Producers.

"The oil business will be a major and important industry in Norway for many years to come", said Norwegian Finance Minister Siv Jensen, according to The Financial Times. In Norway, the biggest hydrocarbon producer in western Europe, oil and gas represent nearly half of exports and 20 per cent of the state's revenues.

Faced with rising opposition to oil and gas exploration, the Norwegian government is keen to "project an image as a responsible environmental steward while pumping oil and gas at a fast clip", Bloomberg wrote.

"The integrated companies will most probably be the companies that will increase their investments in a much broader spectrum of the energy industry going forward", she said.

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Those stocks would be replaced by investments in other sectors, broadly weighted in proportion under the fund's current mandate, the central bank's deputy governor said in 2017, when the bank made its initial proposal. "Therefore this is about spreading the risk", Jensen said at the announcement of the decision.

The finance minister insisted that Friday's decision "does not reflect any specific view on the oil price, future profitability or sustainability of the petroleum sector".

The fund's shares in the 134 firms to be excluded have a value of about $8bn, the ministry said. "It's not a debate about climate, it's about financial risk".

For instance, Cheniere, which does not produce oil or gas, but operates gas liquefaction facilities, was featured on the list. The fund will eventually sell its investments in 150 oil exploration and production companies, which amounts to only 1.2 percent of its holdings. "They are taking a more cautious step than what Norges Bank advised", said Svein Roald Hansen, a Labor Party legislator. It has significant stakes in several oil companies, with some $6 billion tied up in Royal Dutch Shell alone.

Among the firms affected are Cairn Energy, in which the fund held 1.92% worth $22mn at the end of 2018, Tullow Oil, in which it held 2.1% worth $67mn, and Premier Oil, with 1.8% worth $12mn.

The world's largest fund holds 37 billion U.S. dollars (£28.3 billion) in oil and gas holdings and the move sent shares in oil giants BP, Royal Dutch Shell lower on Friday.

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