On Saturday Saudi King Salman bin Abdulaziz Al Saud dissolved the Ministry of Oil and fired Minister Ali al-Naimi, setting up instead the Ministry of Energy, Industry and Mineral Resources, appointing the former Health Minister and the chairman of the Saudi oil giant Saudi Aramco, Khalid al-Falih, as its head.
The deputy head of the Council of the Russian Diplomats Association, Extraordinary and Plenipotentiary Ambassador Andrey Baklanov, stressed that the dismissal of Ali al-Naimi has caused great damage not only to the management of the oil sector in Saudi Arabia, but also to the whole world oil community.
"Ali al-Naimi is not only the leading specialist in this field, but also a person who has consistently defended the idea of negotiating a balanced price level among all oil-producing and oil-importing countries. He convinced King Abdullah, who was Crown Prince at that time, to organize the International organization in Riyadh to balance energy prices. Unfortunately, due to the fact that everyone was too busy looking for ways to gain from high prices, al-Naimi's initiative was not successful," he recalled.
Baklanov expressed concern that after al-Naimi's resignation the discussion about the balance between supply and demand in the oil markets will be forgotten. "In addition, we must remember that minister al-Naimi initiated the base agreement on cooperation in the oil sphere with Russia in 2003. Under him, Russia received the first Saudi gas field for development in 2004. I do not think it would be possible to find an adequate figure to replace such a talented person. Now our best hope is that the aggravation of the situation in the markets will force countries, including the Russian Federation, to approach these issues more carefully," the deputy head of the Council of the Russian Diplomats Association stressed.
A leading analyst of the National Energy Security, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, suggested that al-Naimi's resignation is linked to tensions between him and the Crown Prince, which became evident during the meeting of petroleum exporting countries in Doha, when Saudi Arabia actually disrupted the signing of the multilateral agreement on oil production freeze in these countries.
"The Royal Dynasty might have not liked al-Naimi’s independence. He also might have resigned because of the failure of the meeting in Doha. At the same time, the fact that the beginning of the reforms in the energy sector of the kingdom and his resignation happened at the same time was just a coincidence. These reforms have been brewing for a long time: even under al-Naimi there was a talk about a need for Saudi Aramco to conduct IPO. It is possible that the new head of the Energy Department will focus on attracting more money into the oil industry, in particular, he may sell part of Saudi Aramco on the stock exchange," the expect believes.
Yushkov agreed that Saudi Arabia is not going to negotiate the balancing of the oil market with other countries in a new format. "I don't think that they will make any commitments to OPEC in order to reduce its production of oil, especially in the format of "OPEC and non-OPEC". No negotiations are expected with Russia. In general, neither we, nor Saudi Arabia is ready for such negotiations and the new appointment shows that Riyadh has changed its strategy,'' he pointed out.
According to experts, the kingdom has changed its strategy due to the situation on the global markets, which has already formed a new balance of demand and supply, which does not require freezing oil production to maintain stable prices. "Looking at the events of recent months – the stabilization of futures, Riyadh began to doubt if it needs to freeze anything if the prices started to go up themselves. Certainly, the markets are unpredictable now: as soon as it became known that Saudi Arabia got a new Oil Minister, the prices went up in spite of the fact that Nuaimi supported the oil freeze, which should have brought the prices down. It is difficult to guess how the market will react. Now it mainly reacts to the news about the US reducing the shale oil production and the fires in Canada. The reforms and new appointments in Saudi Arabia the market ignored,'' Igor Yushkov concluded.
As Vestnik Kavkaza reported earlier, Riyadh's actions have confirmed experts' expectations: Saudi Aramco announced plans to significantly increase oil production this year, in particular oil production will be increased by 33% at 'Shaybah' field.
