The move aims at "diversification" of the wealth fund, the Norwegian Ministry of Finance said in a press release, adding that oil production rates will remain "unchanged".
Norway, western Europe's largest oil and gas producer, operates the Global Government Pension Fund (GGPF) charged with using oil revenues to bolster the country's social welfare programmes.
"The oil industry will be an important and major industry in Norway for many years to come," the statement read. "The state's revenues from the continental shelf are, as a general rule, a consequence of the profitability of exploration and production activities. Therefore this measure is about diversification."
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But it added: "A permanent reduction in the oil price will have long-term implications for public finances."
The government will also recommend selling off roughly £6.12bn ($8bn) in small oil firms and will instead rely on large oil production corporations such as Exxon, Shell, and Total. The news comes after Norway's central bank published a press release in 2017 stating that divesting from oil and gas would make the wealth fund "less vulnerable" to oil shocks in the future.
"[…] it is the Bank's assessment that the government's wealth can be made less vulnerable to a permanent drop in oil prices if the GPFG is not invested in oil and gas stocks," the press statement said.
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"If the relationship between long-term returns in the broad equity market and oil and gas stocks persists, neither the expected return nor the market risk in the fund will be affected appreciably by whether or not the fund is invested in oil and gas stocks."
The government maintains a 67 percent share of Equinor (formerly Statoil), a company producing roughly 2m barrels per day. Currently, the company is exploring wind and solar energy as major investments.