A new ruler is making important changes in the state-run petroleum industry of the world’s most influential oil-producing nation.
Salman bin Abdulaziz al-Saud, who became king of Saudi Arabia after the January death of his half-brother, Abdullah, is reorganizing the monarchy.
In a report this month, an area specialist at Rice University’s Baker Institute for Public Policy addressed what change means for oil.
Salman, reported Jim Krane, Wallace S. Wilson fellow for energy studies, has replaced the Supreme Petroleum Council, an advisory group led by the king, with a new body called the Supreme Council for Saudi Aramco.
Leading the 10-member SCSA is Salman’s son Mohammed, who plans to move Aramco’s headquarters from Riyadh, the realm of government and the Ministry of Petroleum and Minerals, to the Eastern Province, the realm of oil operations.
“The arrangement may allow Aramco to pursue long-term ambitions to become a more efficient, vertically integrated oil and petrochemicals company, with greater autonomy from the social-welfare requirements of Riyadh and the market intervention demanded by OPEC,” Krane wrote.
He cited opposing interpretations of the changes. According to one, Aramco will face new pressure from the royal family. In another view, royal influence will decline because SCSA members will be knowledgeable energy technocrats. At least half will come from Aramco.
Among other changes, Aramco Chief Executive Officer Khalid al-Falih has been named chairman of the company as well as health minister. Amin Nasser, who earlier led Aramco’s production and exploration division, is acting president and CEO.
The outgoing Aramco chairman is Ali al-Naimi, minister of petroleum and minister since 1995. Al-Naimi has said he wants to retire.
These changes come as internal claims to Saudi crude rise from zooming growth in heavily subsidized consumption and from new, export-oriented refineries with capacities totaling 1.2 million b/d.
According to Krane, “Facing these evolutionary challenges will require new and innovative policies.”
The policies, to the still unclear extent Salman changes them, will affect oil industry affairs far beyond Saudi borders.
(From the subscription area of www.ogj.com, posted June 19, 2015; author’s e-mail: [email protected])