Don’t take it personally, it’s just that Aramco needs to go public and MBS wants a sibling in charge of the oil and anything to do with the oil, ok?
We jest. Sort of.
Saudi Arabia on Saturday decided to sack Khalid al-Falih, and replace him as Energy Minister with Mohammed Bin Salman’s half-brother, Prince Abdulaziz Bin Salman, who has spent more than 10 years in the ministry.
This isn’t entirely out of left field.
Al-Falih was ousted as Aramco Chairman earlier this week amid yet another push to take the behemoth public, in what would be an IPO to end all IPOs.
Some investors apparently raised concerns about the same person chairing Aramco and serving as energy minister when the company tapped the debt market for $12 billion. He was replaced by sovereign wealth fund boss, Aramco board member and MBS adviser Yasir Al-Rumayyan.
MBS is gearing up to raise Aramco’s zombie IPO from the dead. It was shelved last year after an exhausting push to take the world’s most profitable company public exposed just how tedious the process was likely to be, given corporate governance concerns and the Saudis’ insistence on securing a $2 trillion valuation.
Subbing Al-Rumayyan for Al-Falih purportedly eliminated a “conflict of interest”, and thereby helped accelerate the IPO process. That was effectively the second time in a week Al-Falih had been demoted. Late last month, the kingdom spun off industry and mineral resources from the energy ministry, which meant Al-Falih no longer held sway over those departments.
Now, he’s been stripped of the Energy Minister role – he’s been demoted three times in less than two weeks.
New Energy Minister Abdulaziz Bin Salman isn’t seen as being particularly close to MBS, so it could simply be that the Crown Prince isn’t happy with how things have developed, both with respect to oil prices and the IPO.
In any event, one imagines this could potentially shake up OPEC+. Al-Falih was instrumental in orchestrating the production cuts and was obviously a key player in establishing a closer alliance between the cartel and Russia.
From a fiscal perspective, Riyadh needs oil at roughly $80. Although more expensive crude has at times strained relations with the Trump administration, the lofty valuation MBS wants for Aramco pretty much demands higher prices.
At least MBS didn’t send a squad with a bone saw to talk sense into the Energy Minister.
Maybe, after Al Falih’s close links with Russia, MBS feared Putin was calling the shots, not MBS.
With Wall Street’s current lack of interest in anything oil, MBS’ mission to flog Aramco seems like a ‘fool’s errand’ in today’s market.