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Norway's oil fund wants to divest from oil
 by Staff Writers
 Oslo (AFP) Nov 16, 2017


Norwegian central bank calls for oil, gas divestment
Washington (UPI) Nov 16, 2017 - The Norwegian central bank said Thursday it wanted to remove oil stocks from the government pension fund to cut the vulnerability to weak market prices.

Norges Bank, the country's central bank, said in a letter to the Norwegian Ministry of Finance it was recommending the removal of oil and gas stocks from the benchmark Government Pension Fund Global, arguing that it would make Norwegian government wealth less exposed to a "permanent drop in oil and gas prices."

The price for Brent crude oil, the global benchmark, was around $61.40 per barrel early Thursday, close to a two-year high. Four years ago, the price of oil at this time was around $108 per barrel.

High production levels from emerging producers like the United States and weak economic momentum in recent years have pushed prices considerably lower. Norge Bank Deputy Gov. Egil Matsen cautioned the recommendation was based on sound financial guidance, and does not reflect a particular view of future oil and natural gas prices.

The government owns shares in oil and gas major Statoil. The company reported adjusted earnings after tax for the third quarter at $2.3 billion, more than double the amount from the same period last year.

President and CEO Eldar Sætre said that, even as the price of oil during the last quarter stayed near $50 per barrel, his company was still generating positive cash flow. Nevertheless, the central bank said the pensions fund and the stake in Statoil left it totally exposed to oil price risk.

"In periods of substantial and prolonged oil price changes, the difference in returns between oil and gas stocks and the broad equity market have been considerable," the bank said. "The return on oil and gas stocks has been significantly lower than in the broad equity market in periods of falling oil prices."

Statistics Norway, the government's record-keeping agency, reported taxes on the extraction of petroleum for September were down 7.1 percent from last year.

The central bank in October said the economy was struggling to pick up pace, with inflation expected to stay below 2.5 percent over the next few years. Though the labor market is gaining strength, the value of the currency, the krone, is weaker than expected and the bank said it was keeping its key policy rate at 0.5 percent.

Oil and gas equities account for around 6 percent of the government's benchmark index, or about $36.6 billion.

Norway's sovereign wealth fund, which is fuelled by the state's oil revenues, wants to divest its oil and gas holdings, the Norwegian central bank which manages the fund said Thursday.

In a letter to the government, the bank said that if the world's largest sovereign wealth fund -- commonly referred to as the "oil fund" -- were to divest its oil and gas shares, Norway would be less vulnerable to a lasting decline in oil prices.

The Scandinavian country is western Europe's biggest oil and gas producer.

The sector accounts for 14 percent of Norway's gross domestic product. Any fall in crude prices, as has been the case since the summer of 2014, affects the state's revenues and the fund's investments, upon which the state is increasingly dependent to balance its budget.

"This advice is based exclusively on financial arguments and analyses of the government's total oil and gas exposure," the bank's deputy governor Egil Matsen said in a statement.

It "does not reflect any particular view of future movements in oil and gas prices or the profitability or sustainability of the oil and gas sector," he added.

The bank recommended the removal of oil stocks from the fund's benchmark index, which would still give it a little leeway to invest modestly in the sector.

The finance ministry said it would present its conclusions in the autumn of 2018.

"The problem raised by the central bank is extensive and has many facets," Finance Minister Siv Jensen said in a statement.

"The government is responsible for the Norwegian economy in its entirety and has to adopt a broad and comprehensive approach to this question," she added.

The sovereign wealth fund, fuelled by the state's oil revenues which have dropped sharply in recent years, is currently worth around 8.24 trillion kroner (854 billion euros, $1 trillion), invested primarily in shares (65.9 percent) as well as bonds and real estate.

The oil and gas sector accounts for 5.5 percent of its equity investments.

The Norwegian fund has already divested from coal for both environmental and financial reasons.

The future of Norway's oil sector is at the heart of a lawsuit brought this week against the state by Greenpeace and two other environmental groups, protesting against the awarding of exploration licences in the Arctic.

phy/po/spm

ROYAL DUTCH SHELL PLC

OIL AND GAS
Venezuela in 'selective default', signs debt deal with Russia
 Moscow (AFP) Nov 15, 2017
 Venezuela signed a debt restructuring deal with major creditor Russia on Wednesday, a diplomatic source told AFP, as ratings agencies declared Caracas in partial default. The country is seeking to restructure its foreign debts, estimated at around $150 billion, after it was hit hard by tumbling oil prices and American sanctions. The source did not give details of the deal, which are s ... read more
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