Norways sovereign wealth fund, worlds biggest, to dump oil, gas stocks

Norways sovereign wealth fund, worlds biggest, to dump oil, gas stocks

Norway's finance ministry proposed that the Government Pension Fund Global, the world's largest sovereign wealth fund, sell all stocks listed as exploration and production companies by FTSE Russell.

The move is bound to shake up the oil and gas industry as Norway's fund has assets worth some US$37 billion in upstream investments that the government now considers too risky in light of the heightened price volatility post-2014. It has also been a hot-button issue in Norway, which is seeking to project an image as a responsible environmental steward while pumping oil and gas at a fast clip. It will retain its stakes in Exxon, Shell, BP and other oil majors as they fall into a different category.

Norway has watered down plans for its sovereign wealth fund to shun investing in all oil and gas companies, announcing that it will boycott only pure oil explorers.

"The decision should be seen as a red flag for private banks and investors whose oil and gas stocks are becoming increasingly high-risk and morally untenable", he said in a statement.

The country's wealth fund - built with the revenues of its oil and gas production - will gradually sell some US$8-billion in shares of exploration and production companies, but keep its holdings in integrated firms that have both production and refining which total more than US$20-billion.

Calgary-based oilsands producer Cenovus Energy on the list even though it owns two USA refineries in partnership with Houston-based Phillips 66.

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"The reason they are keeping them is because they think they might increase their renewables, which are of course a direct competitor to oil and gas", said Andrew Grant, a senior analyst at Carbon Tracker, a research organisation that warns investors about potential climate risks.

The proposal was first revealed two years ago when Norges Bank, the country's central bank which manages the fund, advised the Government to exclude the oil and gas sector from the benchmark index for the fund.

"The oil business will be a major and important industry in Norway for many years to come", said Norwegian Finance Minister Siv Jensen, according to The Financial Times.

"They take on much bigger investments than renewable companies do". The Norwegian government indicated in its release that it expects most of the future growth in renewable energy to come from companies that do not now have renewable energy as their main business.

This Sovereign Wealth Fund is now worth some $1 trillion with investments and shareholdings around the world. The fund has a 6 billion-dollar (£4.6 billion) stake in Shell alone.

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