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The Norwegian government plans to decide in the autumn of 2018 on whether to back a proposal from the country's wealth fund to cut oil and gas companies from its benchmark index, the Finance Ministry said in a statement on Thursday.

Deputy Governor Egil Matsen said: "This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure and does not reflect any particular view of future movements in oil and gas prices or the profitability or sustainability of the oil and gas sector".

"However, in periods of substantial and prolonged oil price changes, the difference in returns between oil and gas stocks and the broad equity market have been considerable".

Matsen emphasised that the recommendation is to remove oil and gas stocks from its benchmark index but that it wants to keep them as part of its "investment universe".

In a letter sent to the Ministry of Finance today, the The Norwegian Central Bank, which runs the Sovereign Wealth Fund, said the move would make it "less vulnerable to a permanent drop in oil and gas prices".

The fund is the world's largest sovereign wealth fund.

Wikimedia Commons
Wikimedia Commons

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.

McKibben compared the bank's recommendation to "the moment when the Rockefellers divested the world's oldest oil fortune" in 2014, when the heirs to Standard Oil said that if founder John D. Rockefeller were alive in the 21st century, "he would be moving out of fossil fuels and investing in clean, renewable energy". It also has shares worth more than $1bn in oil services firm Schlumberger and Italy's Eni, whose share price slumped 0.86%.

Norway used oil revenue to build its national pension fund into a $1 trillion behemoth.

"This is the biggest pile of money on the planet, most of it derived from oil - but that hasn't blinded its owners to the realities of the world we now inhabit". In 2016, Norway also withdrew cash for the first time after sinking oil prices opened up holes in the budget. 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.

"That would mean buying more stocks in the oil and gas sector", said Matsen.


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