Norway's state fund 'needs to ditch oil and gas investments'

17 November, 2017, 02:04 | Author: Barbara Daniel
  • An unidentified oil worker walks in front of a natural gas flame burning off in the Persian Gulf desert oil field of Sakhir  Bahrain.       AP  Hasan Jamali

The sector accounts for 14 percent of Norway's gross domestic product (GDP).

Going forward, the Ministry of Finance will obtain further information and notify Parliament about the ongoing work in the Report on the Management of the Government Pension Fund, to be submitted in the spring of 2018.

Norway's $1-trillion sovereign wealth fund proposed dumping about $35bn in oil and gas stocks, including Royal Dutch Shell and Exxon Mobil, to protect the economy of western Europe's biggest petroleum producer. The fund could dump up to $40 billion (€33.9 billion) worth of shares in global oil giants such as Royal Dutch Shell, BP, Chevron and Exxon Mobil.

The move will have significant ramifications for oil and gas companies.

According to Norges Bank, their analysis of the oil price risk in Norway's overall wealth fund risk was based on future oil and gas revenues, and its direct holdings in Statoil and the GPFG.

"There is a substantial return between the oil and gas sector and the broad stock market in periods when the oil price changes substantially".

McKibben compared the bank's recommendation to "the moment when the Rockefellers divested the world's oldest oil fortune" in 2014, when the heirs to Standard Oil said that if founder John D. Rockefeller were alive in the 21st century, "he would be moving out of fossil fuels and investing in clean, renewable energy".

Wikimedia Commons
Wikimedia Commons

"Nothing is imminent and even if the advice is fully implemented we believe this will have limited impact on the oil and gas producers, as the holdings of Norges Bank are relatively small and no doubt will be disposed of over an extended time frame", she said.

The fund is among the world's biggest investors in stocks, owning $667 billion worth of shares in over 9,000 companies globally.

The aim of the proposal is to make Norway's wealth less vulnerable to a permanent drop in oil prices, especially at a time when the fund is increasing the proportion of its portfolio it invests in equities to 70 percent from 60 percent previously.

Oil and gas stocks would be replaced by investments in other companies. "We can do that better by not adding oil-price risk".

The Finance Ministry said it would study the plan and come to a decision next autumn at the earliest. The government, which also controls Statoil ASA and offshore oil and gas fields, was forced to withdrew cash from the fund for the first time previous year to meet spending commitments after oil prices dropped.

And analysts warned that the central bank's proposal could have a knock-on effect on the sector.


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