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Aramco takes charge of Saudi oil policy

Ali Naimi’s oil ministry will no longer be the driver of the kingdoms’ energy strategy, which will reflect broader geopolitical goals. Even the policy of maintaining spare capacity may be up for grabs

The cameras of Saudi state television, as is the custom, panned slowly and silently along the ranks of government ministers as they waited for the weekly Cabinet meeting to begin. The two bright young Cabinet stars, crown prince and interior minister Mohammed bin Naif and deputy crown prince and defence minister Mohammed bin Salman, in a display of relaxed familiarity, were seen exchanging a few words. Veteran petroleum minister Ali Naimi, by contrast, looked gravely ahead, seemingly detached from those around him.

There have been rumours for months that Naimi, who is close to 80 and has been Saudi Arabia’s energy mastermind for three decades, was about to retire. Now it seems that moment is closer than ever. For the radical government restructuring witnessed since King Salman succeeded the late King Abdullah in January means that much of Naimi’s power base has been removed. While he remains the nominal minister of petroleum, oil policy henceforth will be decided by the newly created supreme board of Saudi Aramco, headed by Mohammed bin Salman, a man considerably less than half Naimi’s age.

While the process of restructuring the sector is far from complete it is clear that the oil ministry is no longer the driver of Saudi Arabia’s energy strategy. In the past, Naimi and King Abdullah, who enjoyed a close relationship, determined a strategy that sought to keep global oil markets balanced while meeting any demand for oil from Saudi Arabia’s customers. But it looks as though the emphasis on policy-making will switch now to the Aramco supreme board, making regulation of the energy sector the ministry’s main priority. The consolidation of power means technocratic consultation may be more limited in the future. Given the deputy crown prince’s broad area of responsibility and his close association with King Salman and Mohammed bin Naif, one should not be surprised to see for the first time more evidence of the kingdom’s regional and international geopolitical objectives reflected in oil policy. 

When Naimi will be replaced and who will succeed him remain subjects of conjecture. If oil prices stabilise in the coming months at sustainable levels, the moment may have arrived for Naimi to gracefully bow out. Many people in the kingdom suggest that his position will be filled by deputy petroleum minister Abdel Aziz bin Salman, an able and experienced energy hand. But others believe that the tradition of selecting an oil minister from outside the House of Saud will continue.

Out of the running for contention is the other much-talked-about favourite, former chief executive of Saudi Aramco Khalid al-Falih. While he has been given the mainly honorific role of Aramco chairman, his main challenge now will be to bring the skills and efficiency of the state oil giant to the ailing health sector in his new role as minister of health. Aramco’s interim chief executive is Nasser Amin, formerly a senior figure in the company’s upstream operations. His appears to be a temporary appointment and may only last a few months before he too is replaced – almost certainly from the senior ranks of the company.

After decades when the energy sector was a closed fiefdom, protected from the buffeting that other areas of Saudi life endured, recent startling top appointments and government restructuring have shown that almost anything is possible. In this frenetic atmosphere people are daring to speculate about what once was unmentionable – the possibility, say, of a change of Aramco’s ownership structure.

Other possibilities include a fresh look at how best to maximise the efficient use of the kingdom’s oil production capacity. With market share now a priority for Saudi Arabia and its Gulf counterparts, a debate about the utility of unused spare production capacity should be expected. All of these changes come amid a febrile political atmosphere, where Iran is seen as a destabilising influence across the region and where Saudi-Iranian tension could surface within Opec.

Whether any or all the changes being talked about will materialise is debatable. But from now on one will need to study the statements of Aramco’s Supreme Board for hints of change as much as the Ministry of Petroleum. For an oil sector that has rightly prided itself on steadiness, reliability and conservatism, with Ali Naimi at the helm, the change in dynamic will take some getting used to.

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