Norway Oil Fund Warning for Eni, PetroChina

Norway’s central bank May 5 has kept PetroChina on notice that it may yet be excluded from its $935bn sovereign wealth ‘Oil Fund’ and said it will “follow up Eni and Saipem through active ownership,” all three because of alleged corruption.

Despite a recommendation last year from the bank's advisers to exclude PetroChina from the Oil Fund, the central bank said May 5 it will keep the Chinese stock it in its portfolio for now but may later review its decision. The advisers had said that around 65 senior executives and middle managers formerly employed by PetroChina and subsidiaries have been under investigation for allegedly receiving bribes in China, Canada and Indonesia.

Eni and Saipem meanwhile were “placed under observation due to the risk of gross corruption” since late last year – because of allegations relating to Algeria (2010) and Nigeria (2011) – but neither are to be divested from the Oil Fund.

Instead the central bank said May 5 it “concludes that it is appropriate to use other measures, and that they probably will be better suited to reduce the risk of continued norm violations in these cases.” These include exercise of ownership rights in both companies.

The Oil Fund's holdings, as at January 1 2017, were 1.72% equity in Eni (then worth $1bn), 1.68% in Saipem (worth $95mn) and 0.13% in PetroChina (worth $183mn). It also has a 2.33% stake in Shell (then worth $5.4bn), which also faces allegations over Nigeria alongside Eni, but which the central bank's advisers -- Norway's Council on Ethics -- are not thought to have criticised.

Mark Smedley