Norway’s sovereign wealth fund that manages $1 trillion in assets has announced that it is going to make an exit from many of its oil and gas investments. The Norwegian finance ministry, which is in charge of the fund, stated that the aim of selling some of the oil and gas holdings is simply down to minimising risks. It does not want to be too beholden to the fluctuations in oil prices but at the same time, the ministry that oil is going to remain an integral part of their investment strategy for years to come. The ministry stated, “The oil industry will be an important and major industry in Norway for many years to come. A permanent reduction in the oil price will have long-term implications for public finances.”
As per publicly available information, the Government Pension Fund holds shares in some of the biggest oil and gas companies in the world to the tune of $37 billion. Some of the companies in which it owns stocks are Total, British Petroleum and Shell among others. Norway is the biggest producer of oil in Western Europe and the profits from the oil industry goes into the wealth fund so that the money can be invested soundly. It is important to note that back in 2017, the central bank of Norway had recommended that it would be a good idea to reduce the oil and gas holdings in the wealth fund.
Needless to say, the announcement spooked plenty of investors in the oil and gas sector. When such a big investor announces disinvestment, then it is bound to happen. However, the ministry clearly stated that the move is merely aimed at spreading the risks of the investment fund and not an actual opinion on the continued prosperity of the oil industry. The BBC’s Business correspondent spoke about the wealth funds decision to diversify and stated that it is a sound move. He said, “There have been plenty of people over the years who have put their life savings and pensions in the firm they earned a wage from and lived to regret it when the firm went bust, losing their job, pension and savings in one fell swoop. Norway has decided to not take that risk.”
The Norwegian sovereign wealth fund is simply trying to diversify its interest, according to many experts and over the years, it has been known to favour a steady approach to investing. However, it is being speculated that for an economy which makes most of its money from oil and gas, will be better served if it then does not invest the profits in the oil industry.