Norway’s Wealth Fund Should Never Have Invested In Oil And Gas In The First Place


Norway’s sovereign wealth fund – the Government Pension Fund – has just announced that it’s to sell off its stock in the gas and oil exploration sector. This makes very good sense indeed – so much so that they should never have invested in the sector in the first place. No, this is nothing to do with the climate crisis, nothing to do with stranded assets and all that malarkey. It’s just the simple and basic rules for investing – you diversify.

Norway’s trillion-dollar sovereign wealth fund, the world’s biggest, will sell its stakes in oil and gas explorers and producers but still invest in energy firms that have refineries and other downstream activities, according to a government plan. The proposal announced on Friday indicates the fund’s stakes in integrated companies, such as Royal Dutch Shell, Exxon Mobil and other majors involved in everything from exploration to selling fuel at the roadside, will not be sold. The state, which has built up its wealth on the back of North Sea oil and gas reserves, also has no plans to sell its direct stake in Norway’s Equinor.

It’s that last point which really informs here.

The Norwegian government has released a statement saying that it is proposing to exclude companies classified as exploration and production companies within the energy sector from the Government Pension Fund Global to reduce the aggregate oil price risk in the economy.

It’s nothing to do with stranded assets as we can see. They’re selling off the people who go look for oil. They’re not selling off the people sitting upon oil. So, it’s not about extant assets then.

The advice follows a report from Norway’s central bank in 2017 that dropping oil and gas investment would be a good economic move. The government still owns 67% of Equinor, formerly known as Statoil, which is an oil and gas company which pumps the equivalent of two million barrels of oil per day. The company is diversifying into wind and solar energy.

So, you’re investing. You’re investing a pension fund even. The first rule is diversification. You do not invest your pension in the shares of your employer, that is to be mad. If they go bust then you lose both your job and your pension. You also do not invest in the same sector. You, as above, diversify.

This pension fund owns 87% or summat of one of the world’s largest oil firms. It also gains huge chunks of royalties from that North Sea oil and gas. It should not be investing further into the oil and gas sector. It should be diversifying away from it.

In fact, it should never have invested in the sector in the first place. Nowt to do with anything over climate, just because of sensible and reasonable investment strategies. If you’re making 99% of your money out of oil you invest it outside the oil business.

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Quentin Vole
Quentin Vole

You do not invest your pension in the shares of your employer, that is to be mad.

Indeed. But a lot of folk on the left side of the pond do just that.