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Providing coverage of Alaska and northern Canada's oil and gas industry
June 2019

Vol. 24, No.23 Week of June 09, 2019

Bad news from afar

Norwegian wealth fund ready to unload assets from 26 Canadian companies

Gary Park

for Petroleum News

Norway is on the verge of delivering a troubling message across the Atlantic to Canadian shores.

Under growing political pressure to scale back its offshore operations, Norway’s $1 trillion wealth fund, built from its offshore industry riches into the biggest of its kind in the world, is facing a drastic overhaul as it prepares to sell $7.5 billion in shares of 134 energy companies, including 26 Canadian names.

The target list includes two of Canada’s largest independent players, Canadian Natural Resources and Encana, but excludes Suncor Energy and Husky Energy, two companies that own refineries, although Cenovus Energy is on the list, even though it shares ownership of two U.S. refineries in partnership with Houston-based Phillips 66.

Smaller Alberta-based producers such as Arc Resources, Crescent Point Energy and Whitecap Resources are also expected to feel the squeeze.

Diversification cited

Norway’s Finance Minister Siv Jensen defended what she described as a limited divestment on the grounds that, as a major crude-exporting nation, the country was too dependent on oil revenues and needed to reshuffle its assets.

The government cited concerns that the global push to tackle climate change will undermine the value of oil companies but fended off pressure to embark on a wholesale sell-off of shares in oil and gas companies.

“Climate risk is an important financial risk factor for (the sovereign wealth fund formally known as the Government Pension Fund Global) and will over time have an impact on several of the companies in which it is invested,” said Jensen’s ministry.

It added, however, that the risk must be asserted at the level of individual firms rather than industry-wide and said some major oil companies are leading the effort to invest in lower-carbon or renewable energy sources.

While the GPFG is the first major institutional investor to start down the road to unloading shares in the oil industry, some European and U.S. state pension plans have divested holdings in coal assets and have promised to re-evaluate long-life, high-carbon oil companies such as those tied to the oil sands.

The plan outlined by Jensen’s ministry must still go Norway’s parliament for ratification.

Canadian impact

The prospect that Norway may buckle to pressure from environmentalists and sell off all holdings in global oil companies is “not good” for an array of Canadian producers, said Laura Lau, a senior portfolio manager with Toronto-based Brompton Group.

She told the Globe and Mail that a Norwegian divestment would increase the cost of capital for affected Canadian producers and could prompt other institutional investors to look less favorably on Canadian producers, who are already paying the price for a lack of pipeline capacity out of Alberta.

Lau said there will likely be more bad news to come, adding that prospective investors in Canadian energy companies have a hard job justifying buying into those companies “because everything is going the wrong way.”

Jon Stringham, manager of fiscal and economic policy for the Canadian Association of Petroleum Producers, said CAPP was surprised by the Norwegian action and “we certainly don’t agree with their assertion.”

“We’re seeing billions of dollars here in Canada flowing into innovative technologies that are reducing carbon footprints ... from both E&P and integrated companies.”

He said many forecasters expect growth in global oil and gas demand over the next 20 years, driven by rising wealth in poorer countries, making a strong argument to invest in the sector.






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