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's trillion-dollar sovereign wealth fund is to sell its oil and gas stocks in a move that is likely to have far-reaching implications for the energy sector.

Norway's sovereign wealth fund, the world's biggest thanks to petrodollars, will sell off stakes in oil and gas exploration and production companies to reduce its exposure to black gold, the government said Friday.

Firms to be excluded from the fund would include Cairn Energy, in which the fund had a 1.92 percent stake worth $22 million at the end of 2018, Tullow Oil, in which it held 2.1 percent worth $67 million, and Premier Oil, in which it held 1.8 percent worth $12 million. 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.

"Exploration and production companies will be phased out from the fund gradually over time", the government proposal said, without giving a timeline for the divestment.

Companies involved in downstream operations, such as distribution and refining, and, more importantly, integrated companies which do both down- and upstream - such as giants ExxonMobil, Shell, BP and Total - will not be affected.

However, the ministry also stressed that the country would continue to play a major role in the global fossil fuel market, providing oil and gas reserves as the transition to cleaner fuels continues.

The shift in strategy of the Norwegian Government Pension Fund Global (GPFG) will affect 1.2% of its equity holdings, worth about £5.7bn.

However, a growing number of analysts have argued in recent years that exposure to fossil fuel assets brings with it significant financial risks.

The world's largest sovereign wealth fund is expected to scale back its investments in oil companies, worth nearly $40bn, after ministers backed calls for the fund to turn its back on oil.

Jensen defended her decision to keep the big oil companies in the portfolio, citing their increased investments in renewable energy. Norges Bank, the central bank, had in 2017 proposed a total divestment of oil and gas stocks.

Rather, smaller companies like Marathon Oil and Chesapeake Energy will see their stock sold.

The stocks to be sold are from a group of 134 companies labeled exploration and production firms by the London-based index provider FTSE Russell, a list that includes U.S. oil producer Occidental Petroleum and shale driller Pioneer Natural Resources.

Those of us who care about the Earth overheating will be thrilled to hear this news, but Siv Jensen, Norway's finance minister, made it clear in a statement that the change in investment strategy has little to do with climate change.

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