DUBAI, United Arab Emirates—Saudi Arabia announced the ousting of its longtime oil minister as part of a larger ongoing government shakeup May 7.
A royal decree declared that Ali al-Naimi has been replaced by former Health Minister and Saudi Aramco board chairman Khaled al-Falih.
Al-Naimi has long been a pillar of Saudi oil policy, leading the Ministry of Petroleum and Mineral Resources since 1995. Prior to that role he’d served as the president of oil giant Aramco.
Under a new Saudi leadership led by King Salman, the king’s son Deputy Crown Prince Mohammed bin Salman has largely been overseeing Saudi economic policy along with a handful of new ministers. The changes announced Saturday come as the government plans wide-ranging reforms aimed at overhauling the Saudi economy amid lower oil prices that have eroded state revenues.
Saudi Arabia’s dominant market share and historical ability to influence prices by loosening or tightening its taps gave al-Naimi exceptional influence at meetings of the oil cartel OPEC, where the kingdom is by far the largest producer and de facto policy-maker. His brief utterances on the sidelines of OPEC meetings often had the power to swing global oil prices.
He has presided over a controversial strategy of keeping production levels high despite the drop in prices over the past two years in an effort to drive more expensive producers in the U.S. and elsewhere out of the market. That has led to a glut of supply.
At a talk in February in Houston, he stood by that strategy, arguing that cuts by lower-cost producers like Saudi Arabia would simply subsidize higher-cost ones.
“The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate,” he said in Houston. “It sounds harsh, and unfortunately it is, but it is the more efficient way to rebalance markets.”
Lower oil prices since mid-2014 pushed Saudi Arabia into a budget deficit of nearly US$100 billion last year and a projected deficit this year of $87 billion. Despite efforts to limit reliance on its main export, oil accounted for more than 70 per cent of the state’s revenue in 2015.
Among the changes planned by Mohammed bin Salman and announced last month was a plan to publicly list less than five per cent of Aramco to create a massive sovereign wealth fund to develop its cities.
Aramco boasts the world’s largest oil reserves and produces some 10 million barrels of crude a day, giving it outsized influence over world energy markets. The deputy crown prince put the estimated value of Aramco at more than $2 trillion.
Oil industry watchers have for years speculated on when al-Naimi, who turns 81 this year, would step down. He was born in the kingdom’s eastern oil heartland and studied geology in the U.S. in the 1960s.
The Ministry of Petroleum and Mineral Resources was renamed the Ministry of Energy, Industry and Mineral Resources. In addition to having served as health minister, al-Falih had previously been the CEO of Aramco from 2009 until his appointment as board chairman in May 2015.
Al-Falih spent his entire career at Aramco. He holds a bachelor’s degree in mechanical engineering from Texas A&M University and an MBA from Saudi Arabia’s King Fahd University of Petroleum and Minerals.
A number of other royal decrees announced Saturday as part of the government’s restructuring also saw several ministry names changed and the removal of six ministers, including al-Naimi. The other replacements include the ministers of hajj, commerce and industry, social affairs, health and transportation.
Former Hajj Minister Bandar al-Hajjar, who helped oversee last year’s tragic pilgrimage that saw more than 100 pilgrims killed by a crane collapse and more than 2,400 killed in a crush of crowds, was replaced by Mohammed Bintin.
Also, new Energy Minister al-Falih was replaced as Health Minister by former Commerce and Industry Minister Tawfiq al-Rabiah. Former Social Affairs Minister Majed al-Qasabi was named Minister of Commerce and Investment, one of the newly named ministries. The Social Affairs Ministry will be combined with the Labor Ministry under a new ministry called the Labor and Social Development Ministry.
—Associated Press writer Adam Schreck contributed to this report