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After it rattled oil markets by announcing an intention to divest all its holdings in oil companies, Norway’s sovereign wealth fund has been greenlit to sell just $6 billion worth of oil industry holdings.
Bloomberg reports the final divestment plan released by the Finance Ministry this week was for even a smaller divestment than the one announced in March this year. In March, the planned divestment was to be worth $7.6 billion.
That’s a lot lower than the sovereign wealth fund’s original intention: the divestment of as much as $40 billion in energy company holdings. The fund announced that intention two years ago, sending shock waves through oil markets at a time when the industry had just started to get back on its feet after the 2014 oil price collapse.
At the time, the news sparked fear that other sovereign wealth funds could follow suit and exit the oil and gas industry, hurting it while it was trying to recover from another blow.
Eventually, the divestment was reduced substantially, possibly in recognition of the fact that first, pure-play oil stocks did not make up a huge part of the fund and second, some of these stocks brought in nice returns. Finally, the fund and the government settled for the divestment of only pure-play oil production companies, keeping the stakes in integrated Big Oil sector players.
As of last month, Norway’s holdings in crude oil producers, as classified by the fund’s benchmark index provider FTSE Russell, made up 0.8 percent of its equity benchmark index. The fund’s biggest stakes in that segment are in ConocoPhillips, EOG Resources, Occidental Petroleum, and CNOOC.
According to the Finance Ministry, the divestment will not be made all at once but “gradually” with investments pulled out from “upstream oil and gas companies, including corporate events, new listings and new information on or changes in companies’ activities over time.”
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
The fund which was originally built on global investments in oil and gas announced a year ago that it is going to divest $40 bn of holdings in oil companies but realized that global oil and gas are still the world’s most lucrative investments.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London