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New energy chief but policy change unlikely

LONDON – Saudi Arabia replaced long-standing oil chief Ali al- Naimi and reorganised a number of ministries and central government insti­tutions in a major cabinet shake-up.

Naimi, 80, had served as oil min­ister since 1995. He was replaced by Health minister and former Saudi Aramco chief Khaled al-Falih by a royal decree issued May 7th. The move was expected but still caused a spike in global oil prices.

The latest changes are in line with the government’s Vision 2030 initiative, a series of economic and social reforms designed to diversify the Saudi economy and wean it off dependency on the oil sector. The plan, under the direction of Deputy Crown Prince Mohammed bin Sal­man bin Abdulaziz, is designed to nurture the kingdom’s investment climate, boost tourism and kick-start a viable manufacturing sector.

Faced with a large youth popu­lation, a growing rivalry with Iran, the cost of its intervention in Yem­en, low oil prices and the battle to maintain its global energy market share, the kingdom is attempting a major overhaul of its economy.

The appointment of a new Saudi oil minister, arguably the most powerful and influential individual in the global energy sector, is not a frequent occurrence. Consequent­ly, pundits speculated the reasons behind the appointment of Falih and whether it signified a change in oil policy, a notion dismissed by industry veterans.

“A change in personnel does not equate a change in policy in this case,” said former Saudi Petroleum Ministry senior adviser Moham­mad Al Sabban.

According to Sabban, there are a number of official bodies, includ­ing the Council of Economic Affairs and Development, that are tasked with drawing up the kingdom’s en­ergy policies. A change in the min­isterial position is not likely to alter that.

“The minister’s style during ne­gotiations is up to the minister. However, he will be equipped with the Saudi position and he will try to defend and it doesn’t matter if it is Naimi or Falih,” Sabban said.

The former Naimi adviser stressed there are significant chal­lenges ahead for the new energy minister, not the least of which is running the Petroleum Ministry, which controls numerous other en­tities.

Falih has to deal with the board of directors for institutions such as Ma’aden (Saudi Arabian Mining Company), the Royal Commission for Jubail and Yanbu (RCJY), the Saudi Geological Survey, Aramco and several industrial cities.

“He is also going to be the head of the King Abdullah City for Atomic and Renewable Energy,” Sabban said. “All that, coupled with his main duties, means that he has a lot on his plate and he will need to delegate some authority in order for matters to move efficiently.

“All this will be under his portfo­lio. The problem is if he is a central type of manager he is going to have a lot of difficulties. He has to del­egate authority here and there to move the work forward, especially with the goal of serving Vision 2030 and that can’t be done if one aspect of the ministry is lagging behind others.”

A technocrat like his predecessor, Falih previously served as chief ex­ecutive officer of Aramco and was minister of Health, although for less than a year. “Now he is going to speak on behalf of the kingdom whether at (the Organisation of the Petroleum Exporting Countries) OPEC or otherwise and that’s a to­tally different ball game,” Sabban said.

Regarding the task of represent­ing the kingdom before OPEC, Falih’s main challenge will be how to retain and maintain the Saudis’ leadership in the cartel.

“It will probably be extremely difficult for him at the start, due to lack of experience, but I’m sure he’ll manage, garnering the experi­ence required to defend the coun­try’s interests,” Sabban added.

In a related development, Aram­co is finalising options for its partial privatisation. The deputy crown prince said he expects the initial public offering to be valued at least $2 trillion.

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