Big Oil dodged a bullet.
Cash is once again flowing into the world’s biggest wealth fund.
Norway’s $1 trillion sovereign wealth fund is meeting resistance on its plan to dump more than $40 billion in oil and gas stocks.
Norway is ratcheting up withdrawals from its $890 billion sovereign wealth fund to support a recovery as it foresees a continued slump for the nation’s petroleum industry.
Norway signaled there are risks to expanding the wealth fund’s investments in unlisted assets, properties and infrastructure as it prepares to present a review.
While the crash in oil prices has eroded the Norwegian government’s income from crude production and taxes, it could count on one source of income to remain unaffected: the state’s dividends from Statoil ASA.
The world’s biggest wealth fund won’t be joining its counterparts in a selloff that’s hurting already depressed markets. In fact, officials who supervise the $780 billion fund haven’t even discussed the possibility of shifting strategy, according to Egil Matsen, who this week started as the new deputy central bank governor in charge of oversight of the investor.
As Norway prepares to make the first withdrawals from its $820 billion wealth fund, the government is considering letting it take on riskier investments. The Finance Ministry is looking into whether to boost the fund’s stock allocation to beyond 60 percent as the investor struggles with record low bond yields. The government is forming a panel to assess the impact of changing the limit that will report back in 2017.
Norway’s government will propose spending a record amount of its petroleum wealth to cover budget needs as it seeks to rescue the economy from the plunge in oil prices, according to state broadcaster NRK. The minority coalition plans on spending a record 193 billion kroner ($23 billion) of oil income in 2016, up from an estimated 168.8 billion kroner this year, NRK reported, without citing where it got the information. That represents 2.8 percent of its wealth fund, the world’s biggest, NRK said. The government seeks to keep oil cash spending within 4 percent of the value of the fund. The budget will be revealed at 10 a.m. Wednesday in Oslo. “The budget will be well-adapted to handle challenges both in the short and long term,” Finance Minister Siv Jensen said to reporters as she was leaving her house early Wednesday. It will be a “good” and “expansionary” spending plan, she said.
For Norway, the future may already be here.
Iceland's premier, Olafur Grimsson, has indicated that the Reykjavik government will set up a wealth fund, anticipating a possible offshore oil and gas boom, now that the doorway to exploration is open.