Page 4 - MEOG Week 36

MEOG Commentary MEOG
Falih falls further as contracting continues
Saudi Arabian Energy Minister Khalid Al-Falih has been replaced a week after he was removed as chairman of Aramco, but LTA contracts keep being signed
saudi arabia
What:
Al-Falih’s departure appears to be a move borne of Riyadh’s intent to get everyone singing from the same hymn sheet ahead of the Aramco IPO.
Why:
The Crown Prince is determined that Aramco will achieve a valuation of $2tn. while this seems unlikely to be met, he
is seen becoming more influential in strategy and policy.
What next:
whatever happens with the IPO, contractors will continue to jostle for the large amounts of services work that will arise from Riyadh’s push for oil and gas dominance.
KhALId Al-Falih has been replaced as Energy Minister of Saudi Arabia, a week after he was removed as chairman of state oil firm Saudi Ara- mco in favour of the head of the sovereign wealth fund.
On this occasion, King Salman bin Abdulaziz Al Saud brought in one of his sons, Prince Abdu- laziz bin Salman, to take the reins as the head of the Ministry of Energy, which was also reduced in scope from its previous title of Ministry of Energy, Industry and Mining.
The move marks the first time a member of the ruling family has been in charge of the min- istry, which defines the country’s oil production strategy.
While no reason was been given for the change, Prince Abdulaziz is a half-brother of Crown Prince Mohammed bin Salman (MbS), who is the driving force behind the plan to sell a 5% stake in Aramco via the world’s largest initial public offering (IPO).
Abdulaziz has top-level energy sector expe- rience, recently holding the title of State Minis- ter for Energy Affairs and overseeing talks with Kuwait about the resumption of oil produc- tion from the shared Partitioned Neutral Zone (PNZ), which has a capacity of around 550,000 barrels per day (bpd).
Policy
On September 8, various major news agencies quoted industry sources as saying that the move was unlikely to lead to any change in Saudi oil policy.
Meanwhile, UAE Oil Minister and CEO of Abu dhabi National Oil Co. (AdNOC) Suhail Al Mazrouei told Bloomberg: “The changing of ministers happens and it doesn’t mean change in strategy. Prince Abdulaziz is very decisive, he has a strong personality when it comes to the market. he understands the benefits to all the producers of the leadership role of Saudi Arabia to balance the market and I am not expecting changes.”
The new minister is attending the World Energy Congress in Abu dhabi this week. Speak- ing to Arab News, Robin Mills, CEO of Qamar Energy, said: “I think the Congress in Abu dhabi is a friendly place for him to start off. I presume he will want to send a message of continuity,
pressing on with the OPEC-plus deal and co-op- eration with Russia.”
Meanwhile, independent analyst Anas Al-hajji said: “If I had to count the world’s top five experts on the global oil market, he would be one of them.”
Prince Abdulaziz received a degree in indus- trial engineering and an MBA from King Fahd University of Petroleum and Minerals before joined the energy ministry in 1987 as an adviser. he was promoted to deputy oil minister in 1995 and later became an assistant minister for petro- leum affairs from 2004 to 2015 with responsi- bility of overseeing Saudi Arabia’s oil strategy as well as long-term OPEC strategy. he has been serving as Minister of State for Energy Affairs since 2017.
having been gracious in his departure from Aramco last week, tweeting: “I congratulate my brother his Excellency Mr. Yasser Othman Al-Rumayyan [of the Public Investment Fund]”, Al-Falih is likely to be smarting from the igno- miny of a complete fall from grace.
Al-Rumayyan was already on the board of Aramco and his close ties with MbS are seen as having influenced the decision.
Al-Falih was long seen as something of a thorn in the side of the IPO, and MbS has grown impatient with progress on the initiative. The crown prince has talked of Aramco being valued at $2tn, though it appears that to achieve this, oil prices would need to increase steeply from cur- rent levels, meaning major production cuts, and requiring the assistance of Russia.
International bankers view a price of around $1.5tn as far more likely and there has been increased talk that Tokyo will be chosen for the listing as Brexit issues cloud the picture for Lon- don and concerns about 9/11 lawsuits effectively make a US listing impossible.
On September 9, Reuters reported that oil prices had risen more than 2% after Prince Abdulaziz had affirmed Saudi’s intention to stick with output cuts during the first day of the World Energy Congress.
Contracting continues
despite the commotion in the corridors of power, Aramco has continued to issue contracts
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w w w . N E W S B A S E . c o m Week 36 10•September•2019