There's More to Big Oil Than Oil, Total Tells $1 Trillion Fund

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(Bloomberg) -- Norway’s $1 trillion sovereign wealth fund wants to sell out of oil and gas stocks, arguing that would reduce overall risk to the country since petroleum is already the top export.

But that’s a miscalculation, according to the chief executive officer at Total SA, one of the world’s biggest energy companies and the Norwegian fund’s fifth-biggest oil stock holding. The so-called integrated oil companies, such as Total and the rest of the Big Oil pack, are much more, according to CEO Patrick Pouyanne.

Oil producers that also deal with refining, trading and retail provide a buffer to investors during crude-price slumps such as the one the industry has suffered since 2014, because the parts of their business that purchase oil are able to improve their margins.

The idea that owning stocks in companies such as Total over-exposes Norway to oil and gas risk is a “bad argument,” he said in an interview while attending a closed energy conference in Oslo on Thursday.

“When you buy a Total share, you don’t buy a barrel of oil,” he said. “You buy much less volatility.”

The oil-exit proposal from Norway’s central bank, which manages the wealth fund, shook oil stocks around the world when in was announced in November, including Total. The Norwegian government has now set up an expert group and started a public consultation on the proposal and will pass the issue on to Parliament in the second half of the year.

Read more on the fund’s proposal to sell out of oil

Total’s Pouyanne stopped short of suggesting Norway should scrap the proposal, or distinguish between pure oil producers and integrated companies if the fund is allowed to remove energy stocks from its benchmark portfolio.

“They can do what they want,” he said. “They are free.”

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