Norway's oil fund wants out of oil and gas investments

18 November, 2017, 02:05 | Author: Katrina Soto
  • Norway’s $1 trillion sovereign wealth fund proposed an exit from nearly $35 billion in oil and gas stocks

The Norwegian government plans to decide in the autumn of 2018 on whether to back a proposal from the country's wealth fund to cut oil and gas companies from its benchmark index, the Finance Ministry said in a statement on Thursday.

Deputy Central Bank Governor Egil Matsen told Reuters that the recommendation was created to minimise exposure to fluctuating oil prices.

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure", said fund manager Egil Matsen.

The oil and gas sector now spans a broad range of energy-related activities, including companies classified as integrated oil and gas, oil service and renewable energy.

Norges Bank further said a divestment would not affect the fund's projected returns, nor would it raise its risk profile.

The sovereign wealth fund, fuelled by the state's oil revenues which have dropped sharply in recent years, is now worth around 8.24 trillion kroner (854 billion euros), invested primarily in shares (65.9 percent) as well as bonds and real estate.

For this reason, NBIM said in its current two-year strategy plan that it would adopt a broader wealth perspective when advising the ministry.

Norway is western Europe's biggest oil and gas producer, pumping just under 1.8 million barrels per day, or roughly double the UK's output.

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The fund has holdings in firms including Shell, ExxonMobil, Chevron, and BP.

The fund is among the world's biggest investors in stocks, owning $667 billion worth of shares in over 9,000 companies globally. In addition, oil prices also impact returns in other equity sectors.

Not all investors are enthusiastic about oil and gas - the Caisse de depot et placement du Quebec, with $285 billion in pension funds under management, last month announced it would increase by 50 per cent its investments in low carbon industries while targeting a 25 per cent reduction in its carbon footprint per dollar invested by 2025. Hard-headed central bankers are concerned about the long-term investment case for fossil fuels...unrelated from climate change.

"This is a victory for common sense".

"The straight answer is that all other sectors would be weighted up in proportion".

If accepted by the finance ministry and adopted by parliament, the fund would gradually divest billions of dollars from oil and gas stocks.

The timing of the coming divestments is as yet unclear. Norway past year also withdrew cash for the first time after sinking oil prices opened up holes in the budget.

In addition to its holdings via the fund, Norway has exposure to oil and gas via large untapped offshore hydrocarbon reserves, as well as its 67 percent stake in the national oil company, Statoil.

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