Published: Fri, November 17, 2017
Finance | By Kristine Clayton

Norway wealth fund plans to drop oil and gas stocks

Norway wealth fund plans to drop oil and gas stocks

"The government's wealth can be made less vulnerable to a permanent drop in oil prices if the (pension fund) is not invested in oil and gas stocks", the fund's managers said.

The proposal came in a letter sent by the central bank to the finance ministry and signed by its governor, Oeystein Olsen, and the chief executive of the fund, Yngve Slyngsad, Deputy Central Bank Governor Egil Matsen said in an interview.

The fund's biggest oil and gas holding at the end of 2016 was $5.36bn in Anglo Dutch firm Shell, followed by $3.06bn in ExxonMobil, $2.04bn in fellow United States oil firm Chevron, $2.02bn in the UK's BP, and $2.01bn in France's Total.

It also held 1.7 per cent of Italy's Eni, 1.6 per cent of France's Total and 0.9 per cent of Sweden's Lundin Petroleum, among others.

The Oslo-based fund, which began investing in 1996, has 6% of its money invested in oil and gas stocks. The index has recovered from its summer lows on the back of rising crude prices but it remains down 5 percent year to date and is among the worst sectoral performers in Europe.

"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 aim is primarily to reduce the fund's exposure to oil price fluctuations.

"There is a substantial return between the oil and gas sector and the broad stock market in periods when the oil price changes substantially". The fund's exposure to fossil fuel markets is now double that of a standard global fund, the Central Bank said. It owns owns more than $660bn-worth of shares in over 9,000 companies globally, and reached the $1tn-mark in terms of assets under management in September.

Two years of weaker oil prices has cut into the income of numerous world's largest sovereign-wealth funds, which are in largely resource-dependent countries like Saudi Arabia and Kuwait.

The wealth fund, which controls about 1.5 percent of global stocks, proposes dropping %37 billion of shares in worldwide giants such as BP, Exxon Mobil Corp., Royal Dutch Shell Plc. and other holdings. "We can do that better by not adding oil price risk through the fund". Furthermore, the Government is responsible for the Norwegian economy as a whole and must take a broad and comprehensive approach to this issue, says Finance Minister Siv Jensen.

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