When Saudi Arabia’s ambitious crown prince Mohammed bin Salman wanted something done, his energy minister was often on hand. Khalid al-Falih was tasked with stabilising the oil market after the 2014 crash and helping to diversify the kingdom’s economy.
But the veteran adviser has now been eased aside in delivering a project on which many of Prince Mohammed’s broader ambitions for Saudi Arabia hinge: the long-awaited flotation of Saudi Aramco. On Monday it emerged that Yasir al-Rumayyan, head of the Public Investment Fund, the country’s sovereign wealth fund, had replaced Mr Falih as chairman of the kingdom’s state oil giant.
Installing Mr Rumayyan, a former local investment banker, as chairman of Saudi Aramco underlines the PIF’s growing muscle. A once sleepy fund, PIF has already been charged with developing a number of ambitious multibillion-dollar mega projects in the kingdom, forging new industries from scratch and snapping up stakes in companies including ride-hailing app Uber.
“The PIF seems to be running the show,” said one person familiar with the listing process.
Initial preparations for an IPO, long touted as the world’s biggest, were handled by Saudi Aramco but ground to a halt last year amid concerns about legal risks and doubts over whether it would achieve the $2tn valuation sought by the crown prince.
Yet, as Prince Mohammed seeks to give the initial public offering new momentum, Mr Rumayyan faces an uncertain backdrop for oil demand, fragile stock markets and deepening worries that Saudi Aramco will be used as a cash cow by the government.
Even before Monday’s official announcement, Mr Rumayyan had stamped his mark on the preparations. Over the past two months, he has taken a leading role in discussions such as where Saudi Aramco should list, how much of it should be sold, which advisers need hiring and when it might happen, five people informed on the listing process said.
He now runs a government committee overseeing the flotation, having replaced Mohammed al-Jadaan, the finance minister, in recent months, two of these people said.
The reshuffle will see Mr Falih, a Saudi official with international recognition given his high-profile role as the de facto leader of Opec, retain his influential post as energy minister. People close to the government say there were longstanding concerns that the scope of his responsibilities, which until last week spanned oversight of industry and mining, left him overstretched.
“People feel Falih’s greatest value-add was managing the global audience on energy — it was less about the domestic system,” said one of the people close to the government. “But there was some frustration that his portfolio scope became so big, he became fragmented, not enough things happened.”
In a tweet on Monday, Mr Falih wished Mr Rumayyan success in his new role, saying it was an important step to prepare the company for an IPO. It had long been thought that Mr Falih would not be able to maintain his dual roles as energy minister and chair of Saudi Aramco as the company pressed ahead with a listing.
What is clear is that advisers and ministers are now taking Mr Rumayyan’s remarks as an articulation of Prince Mohammed’s views and that he is following orders from the crown prince, people familiar with the matter say.
Steffen Hertog, a Gulf expert at the London School of Economics, said: “Rumayyan is one of a very small number of economic advisers who have been in key positions around Prince Mohammed continuously since his ascendancy in 2015. He has survived several reshuffles, indicating how critical he is.”
The increased sway of Mr Rumayyan over the listing process also signals that the PIF, which is chaired by the crown prince, will be the chief beneficiary from the sale of a stake in Saudi Aramco, according to people close to the IPO process.
“The PIF is the vehicle for everything. All the money has to go through it,” said the person close to the government. “It will be moulded and shaped in any way that is required to help deliver his highness’s orders.”
PIF, which has invested billions in funds run by Blackstone and SoftBank, aims to lift its assets from more than $300bn to $400bn by next year. The funds are needed to help pay for massive domestic projects that span building Neom, a vast futuristic city, to developing a Red Sea tourism site and creating a domestic arms industry.
As the PIF has engaged with leading banks on deals, the previously low-profile institution has grown in confidence, the person close to the government said. Yet the fund, where a hiring spree has seen the number of employees surge from about 70 three years ago to about 600, has also become “more desperate for cash”.
When the IPO was initially delayed, the royal court instructed Saudi Aramco to acquire the PIF’s 70 per cent stake in Saudi petrochemicals maker Sabic — a transaction seen as partly driven by the need to replenish the sovereign wealth fund’s coffers. It also fuelled concerns among Saudi Aramco executives that the oil company was being used for political purposes.
The appointment of Mr Rumayyan, who is himself juggling multiple jobs on behalf of Prince Mohammed, has fanned those concerns alongside worries over the PIF’s dominant role in the state, one person close to the energy ministry said.
Mr Rumayyan has brought in reinforcements. Government officials overseeing plans for the IPO have been receiving advice from Michael Klein, the former Citigroup dealmaker who has worked closely with the PIF over the past few years.
Mr Klein, who runs a small boutique advisory firm, was a major presence in the months after the IPO plans were announced in 2016 and has regained prominence in recent weeks. His advice is seen to carry as much as weight as some of the top global banks seeking to be involved in the listing process.
With an urgent need for funds, Saudi Arabia is pushing to list Saudi Aramco on the country’s domestic stock exchange as early as November, three people familiar with the IPO process have said.
This week, banks are pitching for global co-ordinator roles, the most important ones in the IPO process. Until now, that work has been led by JPMorgan and Morgan Stanley. Moelis and Lazard have already been appointed independent financial advisers.
The PIF has also opened the process to more banks. Goldman Sachs, which has courted the PIF for months and advised on its sale of the stake in Sabic, is in contention for a role. Others, including HSBC and Citigroup, are also in the mix.
Japanese banks, including Mizuho and Nomura, are among those pitching and have been encouraged by the possibility that Tokyo is now a serious contender for an international listing, according to one Japanese banker.
Bankers have again informed Prince Mohammed and his closest advisers that any valuation of Saudi Aramco is likely to be about $1.5tn. But those skewing the numbers to placate the Saudi royal are being viewed most favourably.
“Everyone wants to find a way of pleasing the headstrong young prince,” said one person briefed on the IPO process. “Top officials want lots of different things at the same time. Not all of them are compatible.”
With reporting by James Fontanella-Khan in New York