OSLO: The Norwegian central bank, which runs the country’s sovereign wealth fund – the world’s biggest – has told its government it should dump its shares in oil and gas companies, in a move that could have significant consequences for the sector.
Norges Bank, which manages Norway’s $1tn fund, said ministers should take the step to avoid the fund’s value being hit by a permanent fall in the oil price.
The fund was built on the back of Norway’s hydrocarbon wealth, and around 300bn krone (£27.73bn), or 6%, is invested in oil and gas companies. The recommendation by Norway’s central bank pushed down shares in European oil companies. Europe’s index of oil and gas shares hit its lowest level since mid-October on the news and was trading down 0.39% by late afternoon.
“The return on oil and gas stocks has been significantly lower than in the broad equity market in periods of falling oil prices,” the bank explained in a statement.
“Therefore, it is the bank’s assessment that the government’s wealth can be made less vulnerable to a permanent drop in oil prices if the GPFG [sovereign wealth fund] is not invested in oil and gas stocks.”
The Norwegian government said it would consider the proposal, but a decision should not be expected until next year and a “thorough assessment” was required.
“The issues raised by Norges Bank are complex and multifaceted,” the finance ministry said. The bank did not set a deadline for when the fund should drop its oil and gas holdings. However, it made clear that its recommendation involved divesting from existing oil and gas shares as well as ruling out future investments.
