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Norway's oil and gas sector divestment plans span global supply chain

Norway's decision to limit its sovereign wealth fund's exposure to the oil and gas sector ostensibly targets oil exploration and production companies for divestment, but the approximately 150 companies identified by the Norwegian Ministry of Finance span the global oil and gas supply chain.

On June 12, the Norwegian Parliament voted to require the $1 trillion government pension fund, known as the Government Pension Fund Global, or GPFG, to divest from roughly 150 upstream oil and gas companies and large coal miners with a total a value of approximately $12 billion, and allows the fund to invest up to $20 billion in the renewable energy sector.

A Norwegian Ministry of Finance spokeswoman said the list is "not based on assessments of individual companies" but rather based on "index provider FTSE Russell's sub-sector classification of companies. The Ministry of Finance is aware that FTSE Russell is preparing changes in its company classification scheme that will also affect the sub-sector '0533 Exploration and Production,' effective July 1." After the vote "the Ministry will, in consultation with Norges Bank, establish rules for the phaseout of such companies from the Fund's benchmark index and investment universe."

The Norwegian central bank manages the fund through its Norges Bank Investment Management subsidiary.

The 150 companies comprise just over 1% of value of the fund's nearly $710-billion equity portfolio, according to S&P Global Market Intelligence data. The GPFG has an average of $55.8 million invested in the targeted companies, with more than $100 million invested in 23 of those; more than $50 million and up to $100 million invested in 16 of those; and $50 million or less in 108 of those.

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The list comprises companies headquartered on nearly every continent, with equities for 48 companies headquartered in the U.S. having a total investment value of $3.65 billion within the portfolio. Twenty-eight companies are in Canada but comprise a total investment value of $868.5 million.

Based on S&P Global Market Intelligence industry classifications, stakes in E&P companies comprise roughly 60% of the value of $8.05 billion worth of oil and gas equities to be divested, while stakes in oil and gas refining and marketing firms account for 23.9%, stakes in integrated oil and gas firms account for 10.3%, stakes in oil and gas storage and transportation firms account for 4.5%, stakes in gas utilities account for 0.9%, and stakes in oilfield services firms account for 0.2%.

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Of the 23 stakes valued at over $100 million, 11 are in U.S. equities.

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