* Government wants to cut Norway's reliance on oil and gas
* Stakes in integrated energy companies unaffected by plan
* Minister says integrated firms can lead renewables shift
* Fund is built on revenues from domestic energy industry
* Graphic: http://tmsnrt.rs/2tskfub(Adds detail, comments from minister, opposition and activists)
By Gwladys Fouche and Terje Solsvik
OSLO, March 8 (Reuters) - Norway's trillion-dollar sovereignwealth fund, the world's biggest, will sell its stakes in oiland gas explorers and producers but still invest in energy firmsthat have refineries and other downstream activities, accordingto a government plan.
The proposal announced on Friday said the fund's stakes inintegrated companies, such as Royal Dutch Shell,ExxonMobil and other majors involved in everything fromexploration to selling fuel at the roadside, would not be sold.
The state, which has built up its wealth on the back ofNorth Sea oil and gas reserves, also has no plans to sell itsdirect stake in Norwegian energy firm Equinor or itsdirect holdings in Norwegian oil and gas fields.
"The government is proposing to exclude companies classifiedas exploration and production companies within the energy sectorfrom the (fund) to reduce the aggregate oil price risk in theNorwegian economy," the Finance Ministry said in a statement.
Energy stocks represented 5.9 percent of the fund's equityinvestments at the end of 2018, worth about $37 billion, funddata showed. But much of that amount is invested in integratedfirms rather than smaller, dedicated explorers and producers.
The fund's shares in the 134 firms to be excluded have avalue of about $8 billion, the ministry said. The fund said theshift would affect 1.2 percent of its equity holdings.
"Exploration and production companies will be phased outfrom the fund gradually over time," the government proposalsaid, without giving a timeline for the divestment.
Among the firms affected are Cairn Energy, in whichthe fund held 1.92 percent worth $22 million at the end of 2018,Tullow Oil, in which it held 2.1 percent worth $67million, and Premier Oil, in which it held 1.8 percentworth $12 million.
BIG OIL "VICTORY"
Parliament, which still needs to approve the proposal, isexpected to the back the plan as the ruling centre-rightcoalition has a majority in the assembly.
The news added to pressure on energy companies, whose shareshave already slipped due to declining crude prices.
The proposal aims to make Norway's wealth less vulnerable toa permanent drop in oil prices, now the fund has increased itsexposure to equities to 70 percent of its value from 60 percent.
The central bank, which manages the fund, originallysuggested excluding all oil and gas companies, includingintegrated firms. But the government adjusted the proposal,saying major firms had the scale to shift to renewable energy.
"To exclude all oil companies would limit the fund'sopportunities," Finance Minister Siv Jensen said.
The decision to keep stakes in integrated firms drewcriticism from those who want Norway to make a more decisiveshift away from fossil fuel investments.
Sony Kapoor, managing director of the think tank Redefine,said diluting the central bank's plan "represents a victory ofBig Oil lobbying over financial prudence and common sense."
Greenpeace campaigner Martin Norman said the government'sdecision "does not address Norway's exposure to oil and we arenot showing the world the way forward."
The opposition Labour Party said it would back thegovernment, even though it argued for a tougher strategy.
"It's not enough, but we should do this now and then wemight see (what to do) in the future," Svein Roald Hansen,Labour's finance spokesman, told Reuters, adding that the statewas right to keep its stakes in Equinor and oil fields.
The fund invests Norway's revenues from oil and gasproduction for future generations in stocks, bonds and realestate abroad.
Its investments in integrated firms at the end of 2018included stakes of 2.45 percent in Shell, 2.31 percent in BP, 2.02 percent in Total, 0.99 percent in Chevronand 0.94 percent in ExxonMobil.
(Additional reporting by Nerijus AdomaitisEditing by Edmund Blair)
