Providing coverage of Alaska and northern Canada's oil and gas industry
May 2020

Vol. 25, No.20 Week of May 24, 2020

Norway dumps oil sands

Wealth fund to divest from four companies it accuses of failing to curb emissions

Gary Park

for Petroleum News

Following through on a warning issued last August, the Norwegian sovereign wealth fund, whose investments are valued at US$1 trillion, has started shedding an estimated US$37 billion of investments in companies it views as a barrier to tackling climate change.

In Canada’s case the list includes most of the big oil sands producers - Suncor Energy, Canadian Natural Resources (CNR), Cenovus Energy and Imperial Oil - which had a combined investment value by Norges Bank Investment Management at US$1.2 billion.

Other energy-based companies headed for divestment include South African petrochemical firm Sasol, Dutch company AGL Energy and Brazil’s Petrobras.

Victim shuffle

The decision by Norges Bank to bail out of the Alberta oil sands also contained one curious shuffle among the Canadian victims.

Seven months ago Husky Energy was on the bank’s hit list, but it has since been replaced by CNR. The wealth fund offered no explanation for the change.

It was unavailable to answer a question some sources in the Alberta government have raised.

They wonder if Husky has survived the cut because of its inextricable link to the Chinese government through majority owner Li Ka-shing, who, operating from his base in Hong Kong, has become the 28th richest person on the plane.

Li didn’t climb the money tree without knowing how to curry favor with the Chinese government, both before and since Beijing manipulated its control over Hong Kong.

He opted to take a hard line against the prolonged protests against the powers wielded by the People’s Republic of China.

Norges Bank’s Council on Ethics said it decided to cut ties with the four Canadian companies based on their “carbon emissions from production of oil to oil sands. It is the first time this criterion is being applied.”

Kenney: ‘incredibly hypocritical’

Alberta Premier Jason Kenney fired back, saying he found it “incredibly hypocritical” coming from a sovereign wealth fund which “owes its genesis to oil revenues coming from the North Sea reserves of Norway. It’s the pot calling the kettle black in this instance.”

He noted that Norway is also engaged in exploring its own offshore fields to boost its oil output, having planned 50 wells this year, but has postponed 10 of them because of COVID-19 and may have more delays to come.

The Canadian Energy Center has reported that Norges Bank investments total US$42 billion in foreign equity holdings, including US$35.9 billion in China, US$3.6 billion in Russia and US$2.5 billion in countries such as the United Arab Emirates, Egypt and Saudi Arabia.

“Norway’s investments in autocracies and dictatorships are twice its investments in Canada,” said a Canadian Energy Center fact sheet.

Trudeau backs Norway

Just when the Alberta government and the four oil sands producers might have counted on Canadian Prime Minister Justin Trudeau for some backing, he said Norges Bank’s decision to dump on the oil sands was a timely warning that Alberta’s economic underpinning might have to adjust to a shift in global attitudes to fossil fuels, even though the oil sands account for only 0.16% of global greenhouse gas emissions.

He said, “it is so important for Canada to continue to move forward on fighting climate change and reduce our emissions in all sectors ... (and understand) that the investment climate is shifting and there is a clear need for leadership and clear targets to reach on fighting climate change to draw on global capital.”

Trudeau made no effort to acknowledge the role of oil sands producers in lowering their per barrel GHGs by up to 30% in the last 20 years, while some of those companies are now targeting zero GHGs by 2050.

Alex Pourbaix, chief executive officer of Cenovus, scoffed at Norges Bank’s explanation for divestment as being “more about publicity than fact.”

“Our company is committed to finding solutions to the global challenge of climate change while continuing to be a significant contributor to the Canadian economy through taxes, employment and buying goods and services from business across this country,” he said.

Laura Lau, senior vice president at Brompton Funds, said Canadian oil and gas companies have “done a good job of bringing (GHGs) down, but it’s the communication they need to improve.”

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