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Norway Pushes Pensions to Fund Oil Industry

<em>Money for oil exploration has dried up in the capital markets; Norway has turned to a new source of funding. </em>
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(June 4, 2012) — The Norwegian government has urged pension funds to finance the country’s oil and gas industries, noting that banks have failed to get the job done.

The Guarantee Institute for Export Credits (GIEK) — a Norwegian government agency with the purpose of granting guarantees for the country’s export companies — told Reuters that it is encouraging pensions for investment in the offshore oil and gas export sector due to the strains the Eurozone debt crisis and tighter financial regulation have placed on banks.

Regulators have begun implementing new capital requirements under the Basel III and Solvency II regimes, which critics allege would hurt equity markets as well as force the closure of remaining defined benefit pension funds.

“Since the banks cannot perform the role they used to, we are looking for alternatives, and we hope that pension funds will join us and help finance the Norwegian oil and gas export industry,” Wenche Nistad, GIEK Managing Director, said at a conference, according to Reuters.

As a result of these financial strains on the country’s banking sector, the government has set up a central bank, Export Credit Norway, with the specific purpose of supporting offshore oil exploration.

The urgency from Norway’s government agency on pensions for help in further offshore oil exploration reflects the immense power of pension capital along with the extent that Europe’s debt crisis has pummeled the banking sector.

The GIEK encourages investment and the export of Norwegian goods and services by aiding companies in securing loans while assuming some investment risk. By the end of last year, total guarantees issued by GIEK reached $12.3 billion (NOK 75.3 billion), up ($2.7 billion) NOK 16.4 billion from the year before.

“The demand for export guarantees has risen considerably over the last years, and GIEK’s liabilities is now five times higher than in 2006,” the agency reported.

GIEK’s Managing Director Wenche Nistad added: “GIEK’s guarantees are particularly important in times of financial uncertainty. The rise in demand for guarantees over the past few years proves that.”