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The kingdom's new oil chief

Khalid al-Falih is now the man who will oversee the sweeping strategic changes underway in Saudi oil and energy policy

FEW Saudis know the kingdom's energy sector better than Khalid al-Falih, who has spent his entire career working for Aramco in a range of different roles. After graduating in mechanical engineering at Texas A&M University he joined the national oil company and within a few years was showing signs of management potential. By his early thirties he was running maintenance at Ras Tanura refinery.

Falih's career then took a sharp turn when he was transferred to Petron, a joint venture between Aramco and the national oil company of the Philippines. On returning to the kingdom his next assignment was to negotiate terms under which international oil companies would explore for natural gas - the first time that foreign firms had an opportunity to bid for upstream work there. The Saudi Natural Gas Initiative, as the venture was called, failed; but the experience of working closely with IOCs proved to be invaluable to Falih, broadening his understanding of the global energy industry.

From then on, his rise through the ranks of Aramco was unstoppable, joining the board of directors in 2004 and becoming chief executive five years later. At that point, there was a widespread assumption among Saudis that Falih would be the natural successor to Ali al-Naimi as energy minister when the time came.

Falih has already pledged to maintain "stable petroleum policies". But quite what this means is up for debate. The kingdom's energy policy under Naimi tried to separate politics from oil, and Saudi Arabia's export strategy relied on long-term contracts with blue-chip buyers. All of that has changed in recent months.

Time for change

The safest interpretation of Falih's appointment is that the new policy - of maximising oil output and exports, with little intention of resuming efforts to manage the price - is now firmly embedded in Riyadh. So the 80-year-old Naimi, a veteran (and often architect) of Opec deals of the past two decades, was no longer the appropriate man to oversee this strategy.

Falih, 60, is a thoughtful strategist, carrying none of the scars of earlier Opec spats. Within the kingdom, his managerial skills and cool head attracted the attention of King Salman and his youngest son, deputy crown prince Mohammed, after the former succeeded King Abdullah in early 2015. When problems arose in the operations of the Ministry of Health, the Saudi leadership called on Falih to step in and sort them out - something he did with notable success, while remaining chairman of Aramco.

Aside from his proven management skills, Falih is a believer in allowing market forces to determine oil prices rather than producers' intervention. This puts him crisply in step with the thinking of the deputy crown prince Mohammed. The two men have been liaising closely on the issue of oil prices over recent months - increasingly to the exclusion of Naimi.

Prince Abdulaziz bin Salman, the assistant oil minister, was considered an outside bet to replace Naimi. But the appointment of Falih sticks with the policy of picking new oil ministers from outside the royal family.

As an energetic reformer with such an illustrious career history, Falih is a natural choice to take over the newly reformulated Ministry of Energy, Industry and Mineral Resources. This assignment, requiring coordination across several sectors, is the toughest that Falih has faced, taking the kingdom along a new path where oil becomes merely one element in a broad diversification scheme. No Saudi is better placed to tackle this challenge, but none will be more responsible for its success or failure.

This article is part of an in-depth series on upstream in the Gulf. Next article: Saudi Vision 2030: Take it seriously.

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