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Norway's Sovereign Wealth Fund

Written By Brian Hicks

Posted September 14, 2009

Norway has a problem any country wishes for. . .

What to do with its extra money.

This week, Norwegians are voting in a general election that observers say will greatly affect the future of the country’s enormous sovereign wealth fund.

But what most investors don’t realize is that the oil money now starting to trickle out of Norway’s national account will soon become a torrent of liquidity in renewable energy markets.

That’s right — Norway just announced a $4 billion foray into renewable energy shares. . . and that’s just the beginning.

Voting for $400 Billion Fund Managers

With only about 4.8 million residents, Norway has become the world’s #3 net oil exporter.

The Norwegians aren’t in OPEC and they aren’t in the EU. The government isn’t really beholden to anyone but its citizens.

And since 1996, Norway has been socking away revenue from its North Sea oil and gas production, which is led by the U.S.-listed StatoilHydro (NYSE:STO).

Norway’s sovereign wealth fund is now worth nearly $400 billion.

Not a bad setup, right?

Well, such a relationship between government and electorate means voting is more like choosing mutual fund managers than it is a process to elect officials to pave roads and fend off Swedish attacks.

So is Norway’s heavily-invested citizenry looking for alpha on the left or right side of the political spectrum?

Norway has managed to avoid the economic traps that caught neighboring Iceland and Latvia and severely damaged others in the region.

Nevertheless, Ole, a 53-year old engineer, said last week that Norway has weathered the recession well "because we have oil, not thanks to the government’s policies."

Ole wants a change from the current left-wing coalition ruling parliament, and a shift to the center-right could mean that more of the gigantic Norwegian Government Pension Fund goes to plugging gaps in the country’s welfare state.

Whichever party Ole opts for, the reality is this: North Sea oil reserves are coming down. Crude output hit a plateau in the 90s, and peak production is now a full decade behind StatoilHydro and its peers, Scotland and Holland.

Natural gas output is increasing, but that doesn’t solve the problem that Norway’s energy intensity (total energy consumption per unit of GDP) is the second-highest in the developed world.

Norway needs not just returns on its sovereign wealth fund investments, but also new ideas on how Norwegians can stay warm through the winter without putting a dent in economic productivity. . . not to mention a need for new sources of revenue, as the black gold dries up.

All countries rich in natural resources should aim to keep domestic consumption low in order to maximize exports. Norway’s energy intensity is therefore a concern to those who want to keep the welfare system robust and the pension fund padded.

Like nomadic hunters that traverse the tundra looking for sustenance, Norway’s leaders are tasked with bringing home returns to hungry stakeholders.

Not Only Norway. . . Billions Spread Around the World

Norway’s strategy for preserving and adding to the country’s sense of fiscal well-being means looking at places like India, where Oslo is pumping $1.2 billion into 232 Indian companies involved in cleantech, emissions control, and energy generation.

Chinese shares are sure to be on the smorgasbord of emerging market green shares targeted by Norway’s retirement fund. Even U.S. clean energy stocks have shown their advantage, compared to sticking with oil. Take a look at this comparison of the United States Oil Fund ETF (NYSE:USO) against the Power Shares Wilder Hill Clean Energy ETF (NYSE:PBW), since the beginning of 2009:

uso etf chart vs. pbw etf

Even though oil has padded Norway’s coffers for a good run, oil is actually being surpassed in potential returns by the very companies that are providing energy alternatives to global consumers.

Again, consider that just $4 billion of Norway’s national wealth is being committed to green shares so far. That’s just 1%. With each uptick in petroleum-generated resource wealth that pours into renewable energy shares, we see more validation and interest in our stock recommendation service, Green Chip International.

And on our radar are not only Norway’s billions, but also Beijing’s $232 billion clean energy stimulus, Germany’s world-leading solar power market, and the U.S. cleantech boom.  They are all creating stellar returns — like over 446% in one Chinese cleantech company since last December.

Politics and profits are intertwined these days, no matter where you are. Don’t miss the next vote that determines how billions will drive your investments. Check out Green Chip International right here to join us in following politics to profit.


Sam Hopkins
Sam Hopkins

Ian Cooper’s Market Insider

You’ve heard about the massive oil find known as the Bakken. . . that behemoth oil reserve stretching across North Dakota, Montana, and southeastern Saskatchewan.

But now geologists, alongside state and industry officials, have a hunch there’s another large crude oil-holding formation in the state. It’s called Sanish-Three Forks. And some analysts believe it may surpass production in the Bakken just above it.

"Eventually it could equal the Bakken, which is remarkable, and that’s an understatement," said Lynn Helms, director of the North Dakota Department of Mineral Resources, about the Sanish-Three Forks field.

What the USGS Missed. . .  In 2008, the USGS reported 4.3 billion barrels of oil in the Bakken. . . but what they failed to notice is what could be a bigger oil source.

From what we’re hearing, there’s significant promise for Three Forks, given its substantially higher number of hydrocarbons when compared with the Bakken formation — another reason geologists think we’re dealing with a separate oil formation in its own right.

It comes down to this: if the Three Forks formation is determined to be a unique oil-producing formation, it could easily add billions of barrels of oil to North Dakota’s oil reserves.

The combined formations could pump out as much as nine billion barrels! And we don’t need to tell you that’s a win-win for the recession-proof state. But I do want to tell you about the Bakken gains my readers have been taking to the bank lately. Find out how you too can play the latest boom here.