King Salman appoints son as #Saudi energy minister | Financial Times

King Salman appoints son as Saudi energy minister | Financial Times:

Saudi Arabia has removed energy minister Khalid al-Falih, one of the most powerful figures in the global oil industry, in a dramatic shake-up of the kingdom’s most important government department.

The move, announced in the early hours of Sunday morning, will see King Salman’s son Abdulaziz appointed new energy minister, breaking the longtime convention in which members of the ruling family are not appointed to the top position in the kingdom’s economy.

Analysts said the move would send shockwaves through the global energy industry at a time when Saudi Arabia and its oil producing allies have been struggling to raise prices.

Mr Falih was stripped of his other roles in the past 10 days, including his chairmanship of Saudi oil company Saudi Aramco, and his oversight of the kingdom’s industrial strategy.

Powerful crown prince Mohammed bin Salman has been pushing to transform Saudi Arabia’s economy and make it less dependent on oil in the long-run, but in the short term needs a higher oil price to finance this transformation. 

“Falih has paid the price for an oil price that remains stubbornly beneath the $70-80 range needed in Saudi Arabia — and for the persistent weakness of the kingdom’s economy,” said Derek Brower, a director at RS Energy Group. 

“Worse still, prices remain too low for the kingdom even though it has shouldered the burden of the Opec cuts in recent months. It’s big for the oil market — Falih was the architect of the cuts deal between Opec and Russia and a persuasive spokesman for their efforts of the past three years to raise oil prices.” 

Prince Mohamamed has made the listing of Saudi Aramco the centrepiece of his economic transformation plan. The planned public offering, which has been long delayed, is expected to be the biggest in history. Prince Mohamamed has targeted a valuation of $2trn, but analysts and bankers have warned that this might be optimistic. 

The decision was announced in a royal decree published by the official state news agency shortly after midnight on Saturday. 

Mr Falih has been the face of Saudi Arabia’s energy policy since he was appointed minister in 2016, but saw his power diminishing in recent weeks. Industrial development and mining were separated from the energy ministry at the end of August, just days before he was removed as chairman of state oil company Saudi Aramco. Yassir al-Rumayyan, who leads the kingdom’s sovereign wealth fund, replaced him in that position. 

In addition to his focus on energy, Mr Falih was seen as one of the main voices shaping the kingdom’s economic policy as Saudi Arabia embarked on an ambitious programme to diversify its revenue sources away from oil. He has also played a role in the kingdom’s foreign policy as he helped manage Saudi Arabia’s deepening relationship with Russia as the two major oil producers worked together to prop up prices. 

Mr Bower said the market would be nervous as big Saudi oil policy shifts often followed the sacking of an energy minister. “To prevent a sell off, the kingdom will need to be clear that it is sticking with its Opec cuts,” he said. 

Russian officials said earlier this week that they did not expect the Saudi decision to remove industry and mining from Mr Falih’s portfolio to affect the kingdom’s energy policy of restraining output. Saudi Arabia has cut its production to less than 10m barrels per day as part of an agreement between the Opec and its allies. 

Prince Abdulaziz, the new energy minister, joined the oil ministry in the 1980s and served in several positions including deputy minister and most recently as minister of state for energy affairs, a position he held since 2017. He is the king’s fourth son and a half-brother of Crown Prince Mohammed bin Salman. 

The crown prince is spearheading the economic overhaul, including a plan to publicly list shares in Saudi Aramco and changing the kingdom’s business environment to make the country more attractive to foreign investors. But the plan has faced hurdles as international scrutiny of the country’s human rights record has grown after the killing of journalist Jamal Khashoggi last year. 

Saudi Arabia has historically kept the position of energy minister separate from direct control of the royal family given its importance to the economy of the kingdom. 

Jason Bordoff, a former Obama administration energy adviser, said the appointment of Prince Abdulaziz as the first member of the royal family to lead the oil ministry was significant. 

“Al-Falih is very highly regarded, and a shake up like this will always rattle markets, but Abdulaziz has served in the ministry for decades and has strong global relationships, and the market will probably see this as a sign of even stronger commitment to supporting prices and to the IPO.”