World’s biggest sovereign wealth fund to decide on dumping oil

Gladys Abbott
March 10, 2019

But the divestment will focus on companies which trade exclusively in exploration and production like Marathon and Chesapeake Energy rather than the integrated oil giants. BP PLC and Canada's Suncor Energy Inc.

"We were quite surprised to see this and we certainly don't agree with their assertion", said Jon Stringham, manager of fiscal and economic policy for the Canadian Association of Petroleum Producers.

The Norwegian fund derives its income from the country's own oil and gas industry.

"We cheer for this decision and the government deserves tribute", says Gaute Eiterjord, leader of Nature and Youth.

Norwegian lawmakers will vote on the proposal to divest from oil and gas companies later this year.

"The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline", Finance Minister Siv Jensen said in a statement, stressing the move should not be intrepreted as a lack of confidence in the future of the oil sector. "Therefore this is about spreading the risk", Jensen said at the announcement of the decision.

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The minister, like the central bank before her, insisted that Friday's decision "does not reflect any specific view on the oil price, future profitability or sustainability of the petroleum sector".

Although it was under some pressure to sell its holdings in the oil and gas sector for environmental reasons, Norway's Central Bank has made it clear that it is selling some of its $37bn of energy shares for more boring reasons, it doesn't like having all its eggs in one basket. Analyst Phil Skolnick of Eight Capital told the Associated Press that the selloff of Canadian stakes is not likely to have any major impact on Canadian markets, which is already feeling the effects of issues related to the inability to build pipelines in order to move available product to market, as well as a shortage of capital.

As such a growing number of investment funds have sought to reduce their exposure to stranded asset risk, either by divesting from the most carbon-intensive fossil fuel assets or calling on fossil fuel companies in which they hold stakes to develop more credible climate change strategies.

After a year of deliberation, the government on Friday approved the removal of 134 companies classified as exploration and production companies by FTSE Russell, while allowing the bigger integrated oil and gas companies to remain in the fund. "These are the companies making the big investments now in renewables and so on". "They are taking a more cautious step than what Norges Bank advised", said Svein Roald Hansen, a Labor Party legislator.

Major integrated oil companies will be breathing a sigh of relief, as the Norwegian fund owns large amounts of their shares.

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