Khalid al-Falih Ousted from Saudi Energy Sector Ahead of Aramco IPO

In last few days, Saudi Arabia’s government experienced a drastic shake-up, turning the world upside-down for Khalid al-Falih, one of the crucial faces of the country. Following his diminished role on the bifurcation of Ministry of Energy and Ministry of Industry and Natural Resources, Falih has been ousted from the remaining leadership roles.

In a royal decree on Sunday, the Kingdom relieved him from the post of energy minister, and appointed King Salman’s son, Prince Abdulaziz bin Salman to take the position. Half brother of Crown Prince Mohammed bin Salman and the minister of state for energy affairs, the 59-year-old Prince Abdulaziz is the first member of the ruling Al Saud family to take up the energy minister post.

Khalid al-Falih has remained Saudi’s most renowned public figures, well-recognized by foreign investors and governments. He led three years of OPEC diplomacy to build a global alliance with producers such as Russia, inducing them to curb production in order to inflate the prices.

However, days ago, he was also removed as the board chairman (Link 2) of the Kingdom’s oil beneficiary, Saudi Aramco, which he once ran as the CEO. The move came as a surprising shift, as the company’s plans for an initial public offering are gaining ground.

The world’s largest top oil exporter announced last week Yasir al-Rumayyan as the new chairman of Aramco. Frequently described to maintain close terms with Saudi’s Prince Mohammed, he heads the Public Investment Fund— the Kingdom’s $320 billion sovereign wealth fund. Analysts believe that as the 49-year-old Rumayyan has worked as a banker for most of his career, he could bring a more finance-driven approach to the firm than Khalid al-Falih.

The shift in the leadership of Saudi Aramco was initially believed to be an idea of eliminating the situation where same person runs both the oil firm and energy ministry. It was because several investors raised concerns this year, during Aramco’s bonds sale of $12 billion. However, days after, the Kingdom ousted Falih from the energy ministry as well.

It was also highlighted that Falih failed to perform for a profile that was too crucial. “His ministry was into everything and many people were unhappy with the lack of progress on the industry front, which a lot of people in the private sector were banking on,” a person close to the government said.

Falih’s removal from such key positions came when Saudi Aramco is working on what might become the world’s biggest IPO of stock.

Saudi Aramco IPO

Crown Prince Mohammed bin Salman, by taking the state-owned oil company Aramco public, will be able raise funds for accelerating the pace of the massive development of Saudi’s economy that he has planned. It was asserted that the company could raise tens of billions of dollars by selling even a small portion of its stock.

Last year, Saudi Aramco pulled back its IPO plans and decided to purchase 70 per cent stakes worth $69.1 billion in Saudi Basic Industries Corp (SABIC), a state-owned petrochemical manufacturing company controlled by the sovereign fund.

The plans, however, couldn’t revive for long, in view of the killing of a Saudi dissident and The Washington Post columnist, Jamal Khashoggi, at the Kingdom’s consulate in Istanbul last October.

Months after in August 2019, Aramco’s chief financial officer announced to the investors that the company was planning for stock listing. In order to bring international investors into confidence, it has already been working to enhance its financial transparency and clarity.

Saudi Aramco still needs to make a decision on where to list the company, which is seen as potentially a big deal for any exchange. Observers have highlighted that it is a significant part of the IPO process for both Saudi and the oil firm.

The company highlighted that it would most likely float its stock on both Tadawul, Saudi’s stock exchange in Riyadh, and a major international market. Some of the major exchanges that indicated their interest to host Aramco include: New York Stock Exchange, London Stock Exchange, Hong Kong Stock Exchange and Tokyo Stock Exchange.

Amongst these, London and New York’s attempts to attract Aramco received major criticism for clearing its way to float in the countries. The major concern of the authorities was allowing the country with a dented human rights record to make billions by listing its state oil firm in such major international exchange markets.

While the Crown Prince MbS favored the New York Stock Exchange initially, the board of Saudi Aramco determined that listing the state energy giant in New York carried too many legal risks to put it on the table. London, on the other hand, was also a concern for its ongoing “political uncertainty”. A report by The Wall Street Journal stated that Saudi Aramco is leaning towards the Tokyo Stock Exchange as its listing venue.

The Saudi Kingdom has now removed Khalid al-Falih from both Aramco and the Ministry of Energy. His dismissal as the energy minister capped 10 days of alterations to senior positions of the sector. New leaders like Yasir al-Rumayyan and Prince Abdulaziz Salman will now be directing such crucial roles of the country’s energy industry, while Saudi remains optimistic. The shift is believed to be induced for making Aramco IPO a success, where Saudi’s human rights records could still become a major obstruction.

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