Sep 3, 2019

Saudi Aramco replaces chairman as oil giant prepares for massive IPO

Saudi Arabian Energy Minister Khalid al-Falih. Photo: Alexander Nemenov/AFP/Getty Images

There's new evidence that Saudi Arabia is serious about moving ahead with a mammoth IPO of shares in state oil giant Aramco after years of delays and uncertainty.

Driving the news: Energy Minister Khalid al-Falih will be replaced as chairman of Aramco by Yasir al-Rumayyan, head of the kingdom's sovereign wealth fund.

  • Al-Falih, via Twitter yesterday, called it "an important step to prepare the company for the public offering."
  • Aramco formally (and briefly) announced the move today.

Why it matters: The Aramco IPO is poised to be the biggest in history. Selling a slice of the company is designed to raise tens of billions of dollars to help finance diversification of the kingdom's economy.

  • "I suspect they want to accelerate the IPO timeline," RBC Capital Markets analyst Helima Croft tells Bloomberg.
  • She said the Saudis want to "bring a sense of urgency to the issue as this is a big signature initiative of Crown Prince Mohammed."

Where it stands: Kingdom officials had previously said they're planning a listing in the 2020–2021 timeframe, but hadn't identified an international exchange.

What they're saying: Oil analyst Ellen Wald, author of the book Saudi, Inc., tells me...

"On one hand, the move is good for the upcoming Aramco IPO because it creates plausible separation for legal anti-trust purposes between the company and Saudi Arabia’s OPEC position."
"On the other hand, an oil company needs to be overseen by an oil man or oil woman, not a venture capitalist or financier like Rumayyan, who lacks experience in the energy industry. "

The intrigue: The news hit just 3 days after a royal decree created a new Ministry of Industry and Mineral Resources, which removed al-Falih's oversight of those sectors. He remains the country's oil minister.

  • Per the Wall Street Journal, the reductions in al-Falih's role in recent days are a "diminishment of his once-formidable grip on Saudi economic policy."

Go deeper

Saudi Arabia's oil minister is out in a major shake-up

Khalid al-Falih. Photo: Anadolu Agency / Contributor/Getty Images

Saudi Arabia has jettisoned Energy Minister Khalid al-Falih in a major shake-up of energy leadership in OPEC's most powerful crude oil producer.

Driving the news: Saudi state media announced that he's being replaced with Prince Abdulaziz bin Salman. He's Crown Prince Mohammed bin Salman's half-brother, according to Bloomberg.

Go deeperArrowSep 7, 2019

Saudi oil sites hit by drone strikes: U.S. blames Iran

Smoke billowing from an Aramco oil facility following the Houthi attacks. Photo: AFP/Getty Images

Iran denied Sunday U.S. accusations that it was behind drone attacks targeting the world's largest oil processing facility at Abqaiq and a major oil field at Khurais in Saudi Arabia the previous day.

The latest: Yemen's Iranian-backed Houthi rebels claimed responsibility for the early Saturday strikes, AP reports. But U.S. Secretary of State Mike Pompeo blamed Iran, saying "there is no evidence the attacks came from Yemen." Iranian Foreign Ministry spokesperson Abbas Mousavi said in a statement the U.S. accusations were "blind, incomprehensible and meaningless."

Go deeperArrowUpdated Sep 15, 2019

The Saudis' crude oil price challenge

Data: U.S. Energy Information Administration; Chart: Axios Visuals

One big challenge facing Saudi Arabia is that crude prices are well below the roughly $80–$85 per barrel the country needs to balance its budget.

The big picture: Saudi Arabia shook up its oil hierarchy Saturday by ousting Khalid al-Falih as oil minister and replacing him with Prince Abdulaziz bin Salman. The kingdom is grappling with the U.S. production boom, sluggish global demand growth, and trade friction that's holding down oil prices.

Go deeper: Less than a year after Khashoggi murder, business booms for Saudi Arabia