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Oilers shaken as Norwegian sovereign wealth fund decides to dump sector stocks

The Norwegian government said it would recommend that the US$1trn fund should focus divestments on firms that explore and produce only, rather than the larger integrated companies
Norway flag
The fund has around US$37bn tied up in oil & gas investments

The oil & gas sector was shaken on Friday after the world’s largest sovereign wealth fund, the Government Pension Fund of Norway (GPFN), decided to divest from the sector.

However, in an announcement, the Norwegian government said it would recommend that the US$1trn fund, which has around US$37bn tied up in oil & gas investments, should focus divestments on firms that explore and produce only, rather than the larger integrated companies.

READ: Oil & Gas firms on tenterhooks as world’s largest sovereign wealth fund to decide whether to dump sector

This clarification will come as a bit of a reprieve for big UK-listed oilers like BP PLC (LON:BP.), in which the fund holds a 2.3% stake, and Royal Dutch Shell PLC (LON:RDSA), in which it has a 2.5% holding.

GPFN’s stake in Shell is also the largest investment it has across its oil & gas portfolio, worth around US$6bn alone, while its BP investment rings in at around US$3bn.

However, the fact the oil majors may be spared initially from the move did little to assuage investors, with shares in BP dropping 1.1% to 534.6p in lunchtime trading while Shell slipped 1.5% to 2,326p.

Aside from the majors, other London-listed oil firms that could now be in line for the bin include FTSE 250 constituent Premier Oil PLC (LON:PMO), in which the fund holds a 1.8% stake, and FTSE Small Cap firms like Nostrum Oil & Gas PLC (LON:NOG).

"Sensible long-term" to move away from oil, says analyst

“There’s a bit of a corporate responsibility aspect to it I think,” said Neil Wilson, chief market analyst at Markets.com, echoing a growing global sentiment among investors that they should diversify away from sectors like oil and mining and toward renewables and other, less controversial areas.

While he doesn’t think the move will be the end of ‘Big Oil’, Wilson says it is “a sensible long term move” for the fund to wean itself off fossil fuels.

The decision is also likely to embolden activists that are continually pushing for other funds, and even fossil fuel companies themselves, to move away from so-called ‘dirty’ fuel and toward renewable energy.

--Adds analyst comment --

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