Investment funds and analysts aren’t the only ones questioning the long-term value of Norway’s state oil company Equinor. Now a member of the Norwegian Parliament is renewing calls to spin off and sell Equinor’s international operations, claiming they present both political and financial risk and often don’t adhere to Norway’s climate goals.
“I see few good reasons to have Equinor active in foreign oil and gas projects,” Kari Elisabth Kaski, an MP for the Socialist Left party (SV), wrote in newspaper Dagens Næringsliv (DN) on Tuesday. “Equinor’s foreign operations should be sold off.”
Kaski serves as a member of the Parliament’s finance committee, and referred to how Equinor’s overseas portfolio has generated losses and environmental controversy over the years. “Its oil (tar) sands investment in Canada was one of the worst projects from a climate perspective and also involved a huge scar on the nature,” wrote Kaski, who was active in environmental organizations before being elected to Parliament in 2017. She noted how Equinor’s current controversial plans to drill for oil in the Australian Bight have unleashed strong protests from local residents, fishing interests and the country’s indigenous population.
“At Parliament we have received letters from Australian politicians who ask us to stop the plans,” Kaski wrote. They view Equinor and Norway as the same, she noted, even though Norwegian government officials have a policy of not meddling in the management of companies in which the state invests. At least Australia and Canada are democracies, Kaski added, noting how many of the other countries where Equinor (still 67 percent-owned by the Norwegian state) has invested (including Libya, Russia, Azerbaijan, Nigeria and Angola) have authoritarian regimes “where I see no reason for a partly state-owned company to have activity and pay taxes.”
Share price has been falling
Kaski’s proposal to divest risky, controversial and non-climate-friendly operations comes just days after DN reported how Equinor’s share price fell nearly 7 percent in the days after CEO Eldar Sætre announced weaker revenues and profits (mostly because of lower oil prices) (external link to Equinor’s own earnings report) and unveiled plans for the next few years. Nearly NOK 40 billion worth of share value has evaporated, with analysts linking the downturn to market fears that Equinor “will invest less in projects with high profit potential and more in those with lower profitability.” That can include renewable energy projects (“which have entirely different returns than oil,” according to analyst Christian Yggeseth of Danske Bank) and other projects unveiled by Sætre.
Several securities firms including Carnegie, Danske Bank and Sparebank1 Markets have downgraded Equinor’s shares since Sætre spoke at Equinor’s Capital Markets Day in London last Thursday. Norway’s own DNB Markets has also dropped Equinor from its portfolio, reported DN on Tuesday.
Equinor’s CEO simply didn’t win over investors and analysts with the company’s presentation of how renewable energy will become its fastest-growing business area. Environmental organizations like that, but not all are keen on wind energy. Equinor also plans to electrify oil platforms on the Norwegian Continental Shelf and invest in more carbon capture and storage to cut emissions to near zero by 2050.
Oil operations appear to remain more traditional outside Norway, though, and that’s what worries Kaski the most. She’s not buying Equinor’s contention that it’s much easier to operate in a more “green” manner at home than it is abroad, given access in Norway to “cleaner energy” and taxes that discourage emissions. Sætre contended, though, that Equinor is also making efforts to cut emissions internationally as well, telling newspaper Aftenposten that the company is using more new technology and replacing diesel with gas in production operations.
DN also noted that even though Equinor has never presented such ambitious climate goals before, the company’s emissions per barrel continued to rise during the past two years. Graphs in Equinor’s own presentation confirming that “don’t look good,” Sætre conceded, “but it has to do with commercial decisions.” He insists that Equinor “fundamentally is on the right course.”
MP Kaski remains unimpressed and reminded in her commentary on Tuesday that Equinor (the former Statoil) was set up “to secure income for Norway from its own continental shelf, create jobs and develop technological and industrial competence.” She’s not pleased that the company is now also operating in 30 countries and has exploration licenses in 21.
It remains both the political and financial risk of the international operations that Kaski is warning her colleagues about. “I see few good reasons for Equinor to have foreign oil and gas projects,” she wrote. “Therefore they should be sold off,” she added, with sales proceeds to be invested in the new renewable energy area being built up.