Al-Falih will be replaced by Yasir Al-Rumayyan, head of the country’s sovereign wealth fund, a Saudi source said, speaking on condition of anonymity. The appointment of Al-Rumayyan, already an Aramco board member, is intended to separate the Ministry of Energy from Aramco and avoid any conflicts of interest as the company prepares for the upcoming IPO, the source said.
“All this shows that in Saudi Arabia there has been some dissatisfaction at the highest levels on how things have been going," said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland. “Al-Falih has not really fully delivered on oil prices. He hasn’t delivered the price that’s required by the Saudi budget. There’s speculation that prices and the IPO are linked and they need higher prices to get the valuation they want for the IPO.’’
When he was first appointed energy minister in 2016, Al-Falih directed a U-turn in Saudi policy in the face of a U.S. shale boom and tumbling crude prices. He led the Organization of Petroleum Exporting Countries to agree to reduce output for the first time in eight years, starting in January 2017, and persuaded other big producers including Russia to join in the cuts. As the decrease failed to re-balance the market, Al-Falih organized extensions of the curbs, involving roughly 60% of the world’s oil output, through March 2020.
On Friday, Al-Falih lost part of his portfolio when the government announced it was splitting the industry and mining functions from the energy ministry.
Al-Rumayyan is governor of the Public Investment Fund, leading the fund’s transformation from a sleepy domestic holding company into one of the biggest investors in global technology start-ups. The fund has accumulated stakes in electric carmaker Tesla Inc., ride-sharing company Uber Technologies Inc. and has made a $45 billion commitment to SoftBank Group Corp.’s $100 billion technology fund.
Al-Rumayyan, a former banker with Saudi Fransi Capital, is a key adviser to Crown Prince Mohammed Bin Salman since being hired to join the Royal Court in 2015.
Aramco, the world’s most profitable company, is stepping up preparations for the sale of a stake to the public. International banks started pitching for a role on the IPO last week, people familiar told Bloomberg.
The country needs crude to trade near $80 a barrel to balance its budget, according to research from the International Monetary Fund and Bloomberg Intelligence. Brent crude was trading at $58.75 a barrel at 3:50 p.m. in London. It also needs higher oil prices if it’s to achieve a valuation of $2 trillion, estimated by Crown Prince Mohammed.
Most analysts see at most $1.5 trillion as more realistic. Even so, the IPO is the cornerstone of Prince Mohammed’s plan to revamp the Saudi economy by attracting foreign investment and building new industries.
The kingdom’s original plan, announced by Prince Mohammed in 2016, was to sell about 5% of the company on the Riyadh exchange and at least one international bourse. The listing was pushed back to 2020 or 2021 to allow Aramco to complete the $69 billion acquisition of chemical maker Saudi Basic Industries Corp.
Saudi Arabia has cut production to less than 10 million barrels a day as part of its agreement with the Organization of Petroleum Exporting Countries to limit output. Al-Falih helped broker the deal that brought other producers like Russia into the effort to balance markets by curbing production. The Saudis are doing most of the heavy lifting to support the deal, pumping about 500,000 barrels a day less than they pledged.