World’s Largest Sovereign Fund to Sell Oil Stocks, Insure Itself Against Falling Oil Prices

Norway’s $1 trillion fund will divest from investments in 134 small exploration and production companies, including the American oil producer Occidental Petroleum and the shale driller Pioneer Natural Resources.

The fund will continue investing in large integrated companies such as BP and Exxon Mobile or Royal Dutch Shell, which may be less exposed to volatility in oil prices.

The decision to reduce Norway’s dependence on the oil industry is also due to the country’s move towards renewable energy. Norway wants to strengthen its position on climate change.

The Finance Ministry said the decision not to exclude super majors from the fund’s portfolio was based on anticipations that renewable energy growth would mostly come from these companies.

The biggest sovereign investor, the Norwegian oil fund, has been built up over the past decades from the country’s oil and gas revenue. It has been investing in assets and securities outside Norway to reduce the risk of potential decline in the country’s oil production. Norway is a relatively small player in the global oil market, covering about 2 percent of the world’s crude demand. However, it is it is the third-largest natural gas exporter, supplying about 25 percent of EU gas demand.

While Norway wants to play a bigger role in environmental protection, its budget still depends heavily on oil and gas. Crude oil and natural gas make up about 50 percent of the country’s total exports and contribute 21 percent of its budget revenue.  �