American Oil and Gas Reporter - April 2019 - 23

Closer Examination Of
Norwegian Recommendation
Belies Divestment Win
Opponents of fossil fuels pursue their beliefs with zeal. We
have seen this misguided passion manifest itself through efforts
to prevent pipeline construction or impose unreasonable setbacks
that would preclude energy development. Opponents also have
turned to applying financial pressure by urging universities or
investment funds to divest their endowments and portfolios of
fossil fuel related stocks. While largely unsuccessful, the
divestment push now is expanding to a sovereign proposal in
which Norway announced in mid-March a recommendation
that its Government Pension Global Fund should divest from
roughly 150 companies engaged in oil and natural gas exploration,
drilling and production.
The Norwegian recommendation is not an all-or-nothing
proposition for either side. It is a partial step in selling select oil
and gas stocks from the trillion-dollar wealth fund, which is the
world's largest publicly held investment. Anti-fossil fuel groups
such as Oil Change International herald this proposal as "a
clear signal of where the global financial community is headed:
directly away from fossil fuels." However, this recommendation
lies outside the frame of traditional divestment decisions. As reported in the Energy in Depth website DivestmentFacts.com,
the following points are important to consider.
· This decision is not final. If the recommendation is to be
carried out, the country's parliament has to approve it.
· This decision does not impact the fund's investments in
international integrated companies. The sovereign wealth fund
owns $37 billion shares in oil companies of various breadths
and the Norwegian Finance Ministry has approved only the sale
of pure exploration, drilling and production companies. The
large integrated firms, such as BP, Royal Dutch Shell, Total and
ExxonMobil, will not be impacted by this decision. This nuance
in the recommendation is indicative of Norway's motivation-
diversification, not denouncement.
· That means only roughly one fifth of the fund's oil and
gas investments are affected. Of the $37 billion in shares that
the fund holds, the proposal would sell only about $7.5 billion.
It is, at its core, a compromise that meets the 2017 proposal
from the fund's investment management halfway. Although
climate activists hailed the original plan as a huge moment,
with nearly 80 percent of the fund's fossil fuel holdings intact,
this plan simply cannot be colored the same.
· The fund highlights the key role large energy companies
play in supporting an array of energy resources. Pointing out
the significant investments in low-emission technology already
sourced from the fossil fuel industry, Norwegian Minister of Finance Siv Jensen has defended her decision to keep major oil
companies in the portfolio.
· Norway still relies on oil and gas for a huge proportion of
state funding. Diversification has been a contentious issue in
Norway for a long time. Although Jensen has offered assurances
that the move does not reflect the government's views on the
price of oil nor the petroleum sector's sustainability, it is ironic
that a state that depends so heavily on oil-a state that has used

"In Norway, with only 1.2 percent of the
fund's stock holdings affected, the
proposed plan rates minimally on the
divestment scale. Even so, the decision
still smacks of hypocrisy.

the proceeds of its massive energy wealth to line the coffers of
the very fund now in debate-suddenly is inclined to give up
select holdings in fossil fuels; albeit, in a token way.
Fortunately, when it comes to divestment efforts directed at
funds held by U.S. institutions, reason and prudent financial
management have prevailed in most cases. According to DivestmentFacts.com, "When schools decide to divest, the financial
hit their endowments take is both significant and ongoing-
having a very real impact on these institutions' ability to support
critical student, faculty and academic programs." Fortunately,
the vast majority of schools approached by divestment activists
have not been fooled.
However, some institutions will pursue political agendas
despite the hardships that will be borne by the intended beneficiaries. The New York City comptroller has issued a request for
proposal in support of the city's planned divestment strategy for
three of the city's five public pension funds. Although not final,
following through on this plan, the Institute for Pension Fund
Integrity describes, would use "retirees as pawns in (this)
political game."
In Norway, with only 1.2 percent of the fund's stock holdings
affected, the proposed plan rates minimally on the divestment
scale. Even so, the decision still smacks of hypocrisy. No doubt
divestment activists will hail this as a victory, and Norway can
placate many opponents of its robust energy development, but
the facts remain far different. Norway is still a critical energy
economy that recognizes the only path forward includes working
with energy companies that have the resources and technology
to find solutions, not empty gestures.
❒

SUSAN GINSBERG is vice

president of crude oil and natural gas regulatory affairs for
the Independent Petroleum Association of America. She covers legislation and regulation,
focusing on the CFTC and
FERC. Her experience in natural gas regulatory affairs spans
more than three decades.
APRIL 2019 23

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American Oil and Gas Reporter - April 2019

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