The Norwegian Sovereign Wealth Fund: From Oil Discovery to National Wealth

Norway, a Scandinavian country known for its breathtaking fjords and high standard of living, owes much of its prosperity to the prudent management of natural resources, particularly North Sea oil and gas. The discovery of oil fields in 1969 transformed the Norwegian economy, leading to the creation of key institutions such as Equinor and the Norwegian Sovereign Wealth Fund (officially the Government Pension Fund Global). This article explores the history of these entities and their impact on Norway's well-being, demonstrating how a finite resource was converted into lasting wealth for future generations.

The Creation of Equinor: From Statoil to Energy Giant

The story of Equinor begins in the 1970s, when Norway decided to take control of its oil resources. In 1972, the Norwegian Parliament unanimously approved the establishment of Den Norske Stats Oljeselskap A/S, abbreviated to Statoil, as a state-owned oil company. The goal was to ensure that oil profits benefited the Norwegian people, preventing the domination of foreign companies. Statoil grew rapidly: in 1974, it began production from its first field, and in the following years it became a global player in the energy sector.

In 2018, Statoil changed its name to Equinor to reflect a transition to more sustainable energy. The new name combines "equi" (from equal, equality, and equilibrium) with "nor" (for Norway), symbolizing balance, equality, and Norwegian roots. This rebranding, proposed by CEO Eldar Sætre, was more than cosmetic: it represented a commitment to diversification, including renewable energy, while maintaining oil as an economic pillar. Today, Equinor is one of the world's largest energy companies, with operations in over 30 countries, and contributes significantly to Norway's GDP, employing thousands of people and generating ripple effects for local suppliers. In 2023, for example, Equinor's supplies exceeded NOK 134 billion, with 94% of its revenue coming from Norwegian suppliers.

The Birth of the Norwegian Sovereign Wealth Fund

The discovery of oil in the North Sea in 1969 posed a challenge: how to manage volatile wealth to avoid inflation and "Dutch disease" (the negative effect of natural resources on other economic sectors)? The solution came in 1990 with the creation of the Government Pension Fund Global, initially known as the Petroleum Fund. The fund was established to invest surpluses from oil revenues, protecting the economy from fluctuations in crude oil prices.

Managed by Norges Bank Investment Management, the fund has reached enormous values: in 2019, it exceeded NOK 10 trillion (approximately €1 trillion). Today, with a value of over $1.25 trillion, it is the world's largest sovereign wealth fund. Its investments are globally diversified across stocks, bonds, and real estate, with a focus on ethical criteria: it excludes companies involved in controversial weapons, tobacco, or environmental violations. Since 1996, the fund has accumulated approximately 80% of Norway's oil revenues, ensuring that the wealth is not spent immediately but preserved for the future.

The Impact on Norway's Well-Being

Equinor and the Sovereign Wealth Fund have revolutionized Norwegian well-being, transforming the country into one of the richest and most equitable in the world. Oil revenues account for approximately one-third of GDP and a quarter of annual government revenue. This has funded a robust welfare state: free education, universal healthcare, generous pensions, and extended parental leave. Norway boasts one of the highest GDPs per capita (over $100,000) and high happiness indices, thanks to an equitable distribution of wealth.

The fund acts as an economic stabilizer: during crises, such as falling oil prices, it provides a buffer, allowing the government to maintain public spending without drastic cuts. Equinor, for its part, generates employment and innovation, with knock-on effects on the economy: the oil industry directly and indirectly employs hundreds of thousands of Norwegians. Furthermore, the fund's ethical management promotes sustainability by investing in the green transition and reducing long-term dependence on oil.

However, challenges remain. Critics warn that the fund could be depleted within two generations if not managed prudently, and its dependence on oil exposes Norway to climate risks and the global energy transition. Equinor has been accused of greenwashing, but its investments in renewables represent a step toward a post-oil future.

Conclusion: A Lesson in Foresight

Norway has demonstrated that natural resources can be a blessing, not a curse, thanks to decisions such as the creation of Equinor in 1972 and the Sovereign Wealth Fund in 1990. These institutions have converted oil into lasting prosperity, financing a social model envied around the world. As the country faces the challenge of climate change, Equinor's diversification and the fund's ethical investments ensure that Norway's prosperity continues. Other resource-rich countries could learn from this example of discipline and foresight.