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After months of deliberation, the Norwegian government proposed in March that the country's $ 1 trillion fund, the largest sovereign wealth fund in the world, be divested of oil and gas exploration companies.
The fund's decision, which has accumulated all of its wealth from Norway's oil and gas revenues, comes at a time when investors are increasingly asking major oil companies to take climate change seriously and to prepare their portfolios for oil. business to a world of societies. Maximum oil demand, whenever it can come.
Norway, however, is motivating its decision for financial reasons in order to reduce its exposure to oil price risk. More importantly, the fund will not divest itself into any of the major oil companies.
While the decision to dump oil stocks had initially caused a shock wave in the markets, the list of 134 companies to exclude only includes companies ranked by the index provider FTSE Russell in the sub -sector of exploration and production. The list includes many American shale producers, Canadian oil producers with a major oil sands operation and oil exploration companies in Africa.
This list could be a telling sign that Norwegian financial experts are thinking about the potential impact on the American market of shale, Canadian oil sands and oil and gas exploration in developing, sometimes anti-democratic and opaque economies. Justin Mikulka from the blog Desmog argues.
The list includes Anadarko Petroleum, Apache Corp., Chesapeake Energy, Concho Resources, Continental Resources, Devon Energy, Diamondback Energy, EOG Resources, Marathon Oil Corp., Murphy Oil, Occidental Petroleum and Pioneer Natural Resources, to name only a few. some. in the American shale patch. Related: Is Beijing losing foothold in the South China Sea?
US shale activity, although record-breaking oil production, especially in the Permian, is no longer the darling affair of Wall Street, as both shareholders and banks are anxious for more. more in the face of the lack of significant profits and profits promised. Many companies promise spending discipline, but many have incurred heavier debts and many are struggling to become or maintain positive cash flow.
In Canada's oil patch, the increase in production over the past year has reached its limits, the price of Canadian oil has plummeted and Alberta oil producer has imposed a reduction in production to the province scale to help increase the price of crude oil.
Cenovus Energy, Encana Corp., Seven Generations Energy and Canadian Natural Resources are among the Norwegian companies whose ownership interest will be gradually divested but do not include Suncor Energy or Husky Energy, for example.
Norway's third largest group of E & P companies includes companies in India (including Indian Oil Corp.), Russia (including Novatek and Bashneft), or companies listed in the United Kingdom. United with significant badets and operations in Africa, such as Tullow Oil.
The list of 134 companies, which contains a whole list of companies, may suggest that Norwegian financial experts – who have managed the fund so that its market value has exceeded one trillion US dollars in less than three decades since its creation – do not expect the fund to earn future profits from shale, tar sands or remote exploration. Related: US: Number of Canadian rigs down, as oil recedes
However, the fund does not sell stakes in major integrated oil companies, and the share of companies on the disinvestment list represents only a fraction of its holdings in the oil and gas sectors.
At the end of 2018, the Norwegian fund held an approximate $ 7.8 billion (NOK 66 billion) interest in E & P companies (clbadified according to the FTSE Russell clbadification). This corresponds to 1.2% of the fund's holdings of shares.
By comparison, at the end of 2018, the fund's total holdings in oil and gas companies were $ 37 billion. They were distributed among 341 companies, including just under 1% in Exxon and Chevron, 2.45% in Shell, 2% in total, 2.31% in BP and 1.59% in Eni. The Shell stake alone was US $ 5.9 billion.
The largest sovereign wealth fund in the world will not depart from these stakes.
Norway has motivated its decision to shoot down exploration oil stocks by reducing financial exposure to volatile oil prices. The objective of the proposed divestment is to "reduce the vulnerability of our common wealth to a permanent decline in the price of oil" and "to reduce the risk badociated with the overall price of oil in the Norwegian economy", given that oil and gas are one of the pillars of the economy and the fund are designed to share oil deposits with future generations of the country.
"Many integrated oil and gas companies already have significant renewable energy activities, in absolute terms, and the group of experts and Norges Bank note that integrated companies can have operations that are not sustainable. 39 renewable energy significantly more important than pure renewable energy companies, "said the Ministry of Finance in its report to Parliament.
"In addition, it is expected that companies that do not have renewable energy as a core business will account for approximately 90% of the growth of publicly traded renewable energy infrastructure by 2030," the report says.
This could also be a message for Big Oil: invest more in renewable energy to spread the risk of peak oil demand, when it occurs, in order to stay in step with what investors want.
By Tsvetana Paraskova for Oilprice.com
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