Norway’s Government Pension Fund Global (GPFG) is set to divest from oil and gas production and exploration companies in an effort to reduce aggregate oil price risks in the economy.

As part of this divestment, companies classified as exploration and production companies by index provider FTSE Russell will be excluded from the benchmark index of GPFG. Over time, exploration and production companies will be phased out of the fund.

GPFG have considered the move since November 2017, when Norges Bank advised the Ministry of Finance to exclude the oil and gas sector from the benchmark index for the fund.

Following this, the ministry appointed an expert group chaired by professor and rector of the Norwegian School of Economics Øystein Thøgersen.

The Ministry of Finance said this latest move comes to reduce the vulnerability of the country’s commonwealth to a permanent oil price decline.

“The oil industry will be an important and major industry in Norway for many years to come.”

In a statement, the Ministry said: “The oil industry will be an important and major industry in Norway for many years to come.

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By GlobalData

“The state’s revenues from the continental shelf are, as a general rule, a consequence of the profitability of exploration and production activities. Therefore this measure is about diversification.”

Minister of Finance Siv Jensen said it is more accurate to sell companies which explore and produce oil and gas than selling a broadly diversified energy sector.

Additionally, the Ministry of Finance will ask Norges Bank to review its efforts relating to climate risk in the GPFG to bolster efforts in relation to those companies that account for the largest contributions to the climate risk associated with the fund.

In order to reduce the state’s oil price risk, the government has no plans to sell shares in the State’s Direct Financial Interest (SDFI) or in Equinor.