After amassing billions of dollars in oil and gas revenue, Norway’s sovereign wealth fund, the world’s largest, will drop oil and gas companies from its benchmark index and investment universe, the finance ministry said on Friday, extending losses of energy stocks worldwide.
Oil and gas stocks represented 5.9 per cent of equity investments at end-2018, corresponding to about $37 billion, according to fund data. “The government is proposing to exclude companies classified as exploration and production companies within the energy sector from the (fund) to reduce the aggregate oil price risk in the Norwegian economy,” the finance ministry said in a statement.
The world’s largest sovereign wealth fund owns $37bn of shares in oil companies such as BP, Shell and France’s Total.
Selling the shares means it would not be as reliant on oil prices, it says. But Norway’s finance ministry said oil will still be central to Norway’s economy.
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.
The move is being positioned as a way to diversify the nation’s wealth away from oil, not a judgement about the future price of oil. The government recommendation must still be approved by the country’s parliament before going ahead.
It will also spare large oil majors which both explore for and refine oil, such as Shell, BP, Exxon and Total, instead recommending the sale of smaller oil firms which focus on finding and drilling oil, of which Norway owns about $8bn.
The advice follows a report from Norway’s central bank in 2017 that dropping oil and gas investment would be a good economic move.
The government still owns 67% of Equinor, formerly known as Statoil, which is an oil and gas company which pumps the equivalent of two million barrels of oil per day. The company is diversifying into wind and solar energy.