Norway’s government has given the go-ahead for the disposal of around Nkr54 billion ($5.9 billion) in oil and gas stocks held by the country’s massive petroleum fund after scaling back heavily on an earlier divestment proposal.
The move, approved by the Finance Ministry late on Tuesday, will see the $1.1 trillion fund sell off its holdings in 95 exploration and production companies classified as “producers of raw oil” in order to safeguard against a long-term fall in oil prices.
The scale of the divestment has been significantly curtailed compared with an initial proposal two years ago from the central bank that runs the fund to ditch $37 billion worth of oil and gas investments - including holdings in global majors - due to the perceived risk of a big drop in value amid environmental concerns.
The government rejected a full ban, however, and decided to maintain investments in integrated majors such as BP, Shell and ExxonMobil, arguing that these companies have the scale and technological expertise to shift towards renewable energy.
The fund will also maintain its stakes in refiners and other downstream companies.
The country’s parliament earlier this year endorsed a heavily diluted plan to divest about Nkr70 billion in oil and gas stocks, while leaving the government to decide on the final list of companies to be excluded from the fund, so the ministry’s decision is a further reduction on this plan.
The revised divestment figure represents a political compromise by the Conservative-led coalition government as it remains heavily dependent on petroleum income but faces increasing pressure from a powerful environmental lobby.
Norway is Europe's second-largest producer of oil and gas after Russia and its wealth fund invests in foreign stocks, bonds and real estate.
While the official line on the divestments is that they are intended to curb an oil-producing nation’s risk exposure, activists and politicians have hailed it as a signal of waning investor interest in the oil industry due to climate change.
The number of companies in the category crude producers was 95 as of mid-September, according to a list from index provider FTSE Russell, which accounts for only 0.8% of the fund’s benchmark for equities.
While the list of companies to be divested has not been disclosed in the latest decision, the fund’s biggest holdings in this category as of the end of 2018 were ConocoPhillips, EOG Resources, Occidental Petroleum and CNOOC Ltd, news wire Bloomberg reported.
Sweden's Lundin Petroleum has said the company is also at risk of divestment, according to Reuters.
The government’s majority 67% stake in state-controlled Equinor is held independently of the fund and has not been the subject of the latest investment review.
The ministry said in a statement that the divestments would be made “gradually over time”.