King Salman has appointed his son Abdulaziz as energy minister, replacing the veteran Khalid al-Falih at the helm of one of Saudi Arabia’s most important government departments.
The decision was announced in a royal decree published by the official state news agency shortly after midnight on Saturday.
Mr Falih has been the face of Saudi Arabia’s energy policy since he was appointed minister in 2016, but saw his power diminishing in recent weeks.
Industrial development and mining were separated from the energy ministry at the end of August, just days before he was removed as chairman of state oil company Saudi Aramco. Yassir al-Rumayyan, who leads the kingdom’s sovereign wealth fund, replaced him in that position.
In addition to his focus on energy, Mr Falih was seen as one of the main voices shaping the kingdom’s economic policy as Saudi Arabia embarked on an ambitious programme to diversify its revenue sources away from oil. He has also played a role in the kingdom’s foreign policy as he helped manage Saudi Arabia’s deepening relationship with Russia as the two major oil producers worked together to prop up prices.
“Falih has paid the price for an oil price that remains stubbornly beneath the $70-80 range needed in Saudi Arabia — and for the persistent weakness of the kingdom’s economy,” said Derek Brower, a director at RS Energy Group.
“Worse still, prices remain too low for the kingdom even though it has shouldered the burden of the Opec cuts in recent months. It’s big for the oil market — Falih was the architect of the cuts deal between Opec and Russia and a persuasive spokesman for their efforts of the past three years to raise oil prices.”
Mr Bower said the market would be nervous as big Saudi oil policy shifts often followed the sacking of an energy minister. “To prevent a sell off, the kingdom will need to be clear that it is sticking with its Opec cuts,” he said.
Russian officials said earlier this week that they did not expect the Saudi decision to remove industry and mining from Mr Falih’s portfolio to affect the kingdom’s energy policy of restraining output. Saudi Arabia has cut its production to less than 10m barrels per day as part of an agreement between the Organisation of Petroleum Exporting Countries and its allies.
Prince Abdulaziz, the new energy minister, joined the oil ministry in the 1980s and served in several positions including deputy minister and most recently as minister of state for energy affairs, a position he held since 2017. He is the king’s fourth son and a half-brother of Crown Prince Mohammed bin Salman.
The crown prince is spearheading the economic overhaul, including a plan to publicly list shares in Saudi Aramco and changing the kingdom’s business environment to make the country more attractive to foreign investors. But the plan has faced hurdles as international scrutiny of the country’s human rights record has grown after the killing of journalist Jamal Khashoggi last year.
additional reporting by David Sheppard in London