Move will reduce massive exposure to oil prices

Norway’s sovereign wealth fund is considering dropping oil and gas companies from its investments, according to a statement made yesterday.

Norway’s deputy central bank chief Egil Matsen, who supervises the fund, told Reuters that it is considering divesting these assets over time. “Our advice is to simply remove the oil and gas sector, as it is defined in the FTSE reference index, from the fund’s reference index,” Matsen said. “That would mean all companies that the FTSE has classified with the sector, should be removed from our reference index.”

Norway’s sovereign wealth fund is one of the largest investment entities in the world, with about $1 trillion in assets. Built up from the proceeds of decades of oil and gas production, the fund controls about 1.5% of global stocks, according to Bloomberg.

According to the Wall Street Journal, oil and gas companies account for about 6% of the firm’s equity holdings, or $36.5 billion. This is mostly invested in supermajors, with Shell, Eni, BP and Exxon each receiving billions in allocations.

Norway is just as exposed to oil and gas as any other petrostate

From an investment standpoint, this is an understandable decision for Norway. The country is already heavily exposed to the risks and rewards of oil and gas exploration. According to the OEC, oil and gas products make up 52.6% of all of Norway’s exports. This is one of the highest proportions of any nation, higher than many major energy players like Russia and Canada.

This reliance on oil and gas has been thrown into focus by the commodity price downturn. The value of Norway’s exports has fallen sharply since oil prices dropped, falling from $150 billion in 2014 to just under $90 billion in 2016, a decrease of 40% in two years.

$1 Trillion Norway Sovereign Fund Considers Divesting Oil & Gas

Source: OEC

Furthermore, the Norwegian government also holds a majority stake in Statoil, in a position worth about $46 billion. Even without the wealth fund, then, Norway will experience the fortunes of the oil and gas industry.

“Our perspective here is to spread the risks for the state’s wealth,” Matsen said. We can do that better by not adding oil-price risk.”


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