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Norway Wealth Fund Gets Nod to Sell $6 Billion in Oil Stocks

Published 10/01/2019, 05:03 PM
Updated 10/01/2019, 11:48 PM
Norway Wealth Fund Gets Nod to Sell $6 Billion in Oil Stocks

(Bloomberg) -- Norway’s massive wealth fund got the go-ahead to sell oil and gas stocks worth $5.9 billion, ending a two-year process that has reduced an initial proposal to dump all its petroleum investments to a more moderate divestment.

The $1 trillion fund shocked markets in 2017 when it asked the government for permission to sell about $40 billion in such stocks, arguing a cut in exposure would reduce the overall risk for Norway, western Europe’s biggest petroleum producer. That plan was then heavily diluted in a political compromise that shielded the world’s biggest oil companies.

The final plan from the Finance Ministry released late Tuesday evening in Oslo outlines a divestment that will be even smaller than the government had foreseen in March, when it estimated disposals would total about 70 billion kroner ($7.6 billion).

As expected, the divestment will now include companies classified as “Oil: Crude Producers” by index provider FTSE Russell. The number of companies held by the fund in that category was 95 in mid-September, making up 0.8% of the fund’s benchmark for equities. The divestment will “be made gradually over time,” the government said.

According to a list provided by FTSE Russell in July, the fund’s biggest holdings in that category at the end of 2018 were ConocoPhillips (NYSE:COP), EOG Resources Inc (NYSE:EOG)., Occidental Petroleum Corp (NYSE:OXY). and CNOOC Ltd. The Finance Ministry didn’t provide an updated list of companies in Tuesday’s statement.

By using the index classification, the fund’s investments will continuously be blocked from “upstream oil and gas companies, including corporate events, new listings and new information on or changes in companies’ activities over time,” the government said.

The plan marks a compromise for the Conservative-led government, which is heavily dependent on oil income and faces an increasingly powerful environmental movement. The government decided to shield the biggest oil companies such as Royal Dutch Shell (LON:RDSa) Plc, arguing they will likely be big investors in renewable energy in the years ahead.

Regardless of its scope, the divestment has been widely debated in Norway and left a mark globally. While the fund and the government have insisted the move has nothing to do with the climate crisis and is purely about an oil-producing nation’s risk exposure, it has been widely celebrated by activists and politicians as a powerful signal that fossil fuels are losing favor among investors.

In a show of how divided even Norway’s government is on how to interpret the divestment, Environment Minister Ola Elvestuen called it “the most important climate decision” the coalition has agreed on, in direct contradiction of the official line.

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