August 24, 2018 Read More →

Decision looming for Norway fund’s future oil, gas investments

Reuters:

Norway’s trillion-dollar sovereign wealth fund should continue to invest in oil and gas companies, a government-appointed commission recommended on Friday, contradicting earlier advice from the central bank, and boosting the shares of oil firms. A decision on whether to drop energy shares from the fund’s benchmark index, and thus divest tens of billions of dollars from oil and gas stocks over time, is expected this autumn.

Shares of European oil and gas companies fell last November when the fund’s manager, the Norwegian central bank, announced its proposal to cut the exposure of the fund – and thus the Norwegian government – to oil price fluctuations. On Friday shares of European oil firms, including Shell and BP, rose on the news of the commission’s advice.

“To get that small insurance (against the fluctuation of the oil price by removing energy stocks), it would cost the fund a lot, as it would be less diversified,” commission chair Oeystein Thoegersen told Reuters. “Second, you would change an institution that has worked very well. And third, as the years go by, we have less and less oil risk,” he said, referring to Norway’s declining oil reserves.

The fund, the world’s largest sovereign wealth fund, invests Norway’s revenues from oil and gas production for future generations in stocks, bonds and real estate abroad. Energy stocks amounted to about 4 percent of the value of the fund, or about 315 billion crowns (£29 billion), at the end of 2017, the commission said.

The fund is among the largest investors in a wide range of oil companies, holding stakes at the end of 2017 of 2.19 percent in Shell, 2.17 percent of BP, 0.94 percent of Chevron and 0.87 percent of Exxon Mobil.

“This recommendation will prove to be a failure and the Norwegian Government will be forced to change this as fossil fuel investments continue to drag down global investment indexes and the Norwegian economy,” Tom Sanzillo, Director of Finance for US energy finance think-tank, IEEFA, told Reuters.

More: Norway’s $1 trillion wealth fund should keep oil stocks-commission

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