Norway’s influential oil and gas-focused sovereign wealth fund has lifted its investment boycott on two exploration companies, opening a potentially significant new investment stream for Irish offshore drilling in the process.
One of the companies the fund is now free to invest in is Scottish explorer Cairn Energy which has significant assets in Irish waters.
The world’s largest sovereign wealth fund, operated by Norway’s central bank, had excluded Kosmos Energy and Cairn Energy from its list of investment options in 2016 on ethical grounds.
The fund’s ethics watchdog found what it called “an unacceptable risk related to petroleum prospecting off the coast of Western Sahara”.
However, the boycott has been lifted since both companies said they had discontinued their business in the African region.
It remains to be seen if Norway will invest in Cairn and if such a move would have an eventual knock-on benefit for offshore exploration in Ireland. However, Ronan MacNioclais, oil and gas partner at PwC Ireland, said it remains welcome news.
“It’s positive in terms of showing the quality of players that Ireland is attracting if the Norwegian Wealth Fund is willing to invest [in one of those players],” he said.
Cairn has two significant investments in Irish waters, both in partnership with Irish explorer Providence Resources. Cairn is a 30% shareholder in the Diablo prospect off the south-west coast and holds a minority stake in the Spanish Point prospect, also off the west coast, about which discussions on the future licence status are pending.
A recent study of the Irish offshore industry, by PwC, showed that nearly two-thirds of exploration companies, either already active here or interested in investing here, rate the outlook for Ireland’s oil and gas sector positively. It also said that investment in Irish exploration should top €500m over the next two years, but that nearly 40% of firms are experiencing difficulty in finding partner companies to help develop their Irish assets.
Around 12% of companies still see access to funding as being a key hurdle to working in Irish waters.
Norway’s wealth fund was created from the proceeds of the Scandinavian country’s oil industry and operates under ethical guidelines set by the country’s parliament.
The fund owns shares in more than 9,000 companies, roughly equating to 1.4% of the world’s listed equity, so its decisions to drop or reinstate firms from its investments carry considerable weight among investors.
Additional reporting Reuters