Prince Abdul Aziz the antidote to oil market uncertainty

Prince Abdul Aziz the antidote to oil market uncertainty

Prince Abdul Aziz bin Salman. (AFP)

The appointment of a new energy minister is always big news in Saudi Arabia, but the naming this week of Prince Abdul Aziz bin Salman is even bigger news, domestically and globally. Saudi Arabia is at an existential crossroads as it builds its non-oil-dependent future, while globally the oil markets are facing uncertainties about supplies, prices and non-oil alternatives. Prince Abdul Aziz may be the antidote in these uncertain times. His appointment should reassure markets and give hope to many young Saudis whose dreams are pinned to their country’s transformative policies.

Under Saudi Arabia’s Vision 2030, the mandate of the minister of energy has domestic impact over fiscal policy, industrial policy and economic diversification. Fiscally, the ministry’s actions affect how much revenue the public purse gets from the sale of oil and gas. And Vision 2030’s diversification goals depend in major part on the success of the policies undertaken by the Ministry of Energy.

As the largest global oil exporter, Saudi Arabia’s energy policy is as important to the rest of the world as it is to the country itself. Prince Abdul Aziz was preceded by five ministers who gained international prominence as ministers of petroleum and later energy. Abdullah Al-Turaiqi, the first Saudi minister of petroleum and a US-trained oil engineer, was instrumental in setting up OPEC and starting the discussions of national control of oil production decisions and a more equitable revenue distribution between producing nations and oil companies. For 24 years, the second minister, Ahmed Zaki Yamani, was OPEC’s most recognizable face and a colorful international figure. He presided over the gradual nationalization of Aramco and the establishment of the Saudi petrochemical industry. Subsequent ministers also made an impact domestically and on the world energy stage.

As colorful and competent as they were, however, oil ministers in the end carried out Saudi Arabia’s sovereign energy policy. That policy is an all-government effort led by the king and crown prince. Prince Abdul Aziz has the advantage of being privy to those discussions for decades, even having an important role in shaping them.

Saudi Arabia is on the cusp of real, existential decisions affecting its future, including those related to an Aramco initial public offering and diversification policies. Unlike other countries, diversification in Saudi Arabia is a complicated process that has at least four fundamental meanings. First, the diversification of the economic base from the dominance of the oil and gas industries to a more balanced mix that includes other sectors, such as manufacturing and services. The second is diversification of exports. Currently, oil represents more than 90 percent of Saudi exports and Vision 2030 calls for drastically reducing that share. Third, diversification in Saudi Arabia means diversifying government revenues from near-total reliance on oil to a more normal mix of oil and non-oil sources, so as to avoid the volatility to government finances that comes from over-reliance on oil income. Fourth, diversification in the energy mix itself, from fossil fuels to renewables. All of these four levels of diversification are closely related to the post of the minister of energy. Prince Abdul Aziz is well versed in all of them and his appointment should have a positive impact on how Saudi Arabia achieves these forms of diversification within the timeframe set by Vision 2030.

He is at ease as an academic economist, industrial engineer, oil technocrat and high-level policy-maker.

Abdel Aziz Aluwaisheg

The timely implementation of Vision 2030 is crucially important. There is no time to waste and, with the new, experienced minister, there will be no learning curve, as he is highly qualified and has been involved in these decisions for some time. For 30 years, Prince Abdul Aziz served as an adviser and then deputy and assistant minister of petroleum. In 2017, he was appointed as minister of state for petroleum. Before joining the ministry in 1987, he was a researcher and academic at his alma mater King Fahd University of Petroleum and Minerals, Saudi Arabia’s equivalent of America’s Massachusetts Institute of Technology. He is at ease as an academic economist, industrial engineer, oil technocrat and high-level policy-maker.

One of Prince Abdul Aziz’s lesser-known but extremely important achievements was the establishment of the Saudi Energy Efficiency Center. It was established in 2010 to promote energy efficiency and conservation policies. It sounded the alarm about runaway energy consumption in Saudi Arabia, which was growing at alarming rates, far outpacing the rates of population growth and economic development. According to the center, about 38 percent of all oil and gas produced in Saudi Arabia is consumed locally. Much of it was being wasted because of inefficient appliances, insufficient building codes and outmoded production processes. All were encouraged by low domestic energy prices.

Globally, Prince Abdul Aziz is well known to the energy markets and his appointment should be reassuring. He has witnessed many ups and downs in the oil market, from below $10 for a barrel of oil in the late 1990s to over $160 in 2008, with many highs and lows in between. As Saudi Arabia’s energy minister, he will be interested in the long-term oil policies that benefit both producers and consumers. As a major energy exporter, Saudi Arabia is deeply invested in the global economy, whose health is key to its ability to export at sustainable prices.

One of the first tasks the new minister faces is what to do about the global oil glut. OPEC oil ministers are this week meeting with their non-OPEC counterparts in Abu Dhabi to discuss why prices remain stubbornly low despite big output cuts by the OPEC+ group and supply reductions in Venezuela, Libya and Iran.

  • Abdel Aziz Aluwaisheg is the GCC Assistant Secretary-General for Political Affairs and Negotiation, and a columnist for Arab News. The views expressed in this piece are personal and do not necessarily represent GCC views. Twitter: @abuhamad1
Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view

Oil output deal is here to stay, new Saudi minister vows

Saudi Arabia’s newly appointed energy minister Prince Abdulaziz bin Salman said the kingdom is proceeding cautiously with its planned nuclear power program. (AFP)
Updated 10 September 2019

Oil output deal is here to stay, new Saudi minister vows

  • Prince Abdul Aziz bin Salman is center of attention at World Energy Congress in Abu Dhabi
  • Saudi Arabia has said it wants to tap nuclear technology for peaceful uses

ABU DHABI: A deal agreed a year ago by major oil producers to limit output was “until death do us part,” Saudi Arabia’s new energy minister pledged on Monday.

Prince Abdul Aziz bin Salman wants the Organization of Petroleum Exporting Countries (OPEC) to strengthen and extend its agreement with non-OPEC producers, including Russia, he said in his first public appearance since being appointed on Sunday.

Previous attempts to limit output had been “successful but temporary in nature…Now it is different in quality, size and perpetuity,” Prince Abdul Aziz told a packed house at the World Energy Congress in Abu Dhabi.

The output deal was sealed at an OPEC meeting in Vienna in December 2018. “Soon we will celebrate the anniversary of the charter that will continue to bring us together, and it is until death do us part,” Prince Abdul Aziz said.

The minister also hinted that it would desirable to widen OPEC to give non-members a more permanent role. “This industry has to have the institutions that can give the notion of support toward sustainable energy supplies commensurate with what the world economy requires,” he said.

But he said non-OPEC producers — including the biggest, Russia — should be subject to a process he summed up in the motto of President Ronald Regan: “Trust, but verify.” He will meet other producers, including Russian energy minister Alexander Novak, in the UAE later this week.

Many industry analysts see a greater threat to the oil price from falling global demand, mainly because of the economic fallout from trade disagreements between the US and China.

Prince Abdul Aziz appeared sanguine on this subject, though he said the “jury was out” on future demand projections. “I am fundamentally an optimist, and if I’m not optimistic, I’d make every effort to create a situation where I could regain my optimism. They are not yet trade wars,” he said.

The minister’s appeal for a stronger and deeper OPEC came in an eagerly awaited interview on the first day of the concgess. A career energy professional over more than three decades, the prince underlined his respect for his predecessor, Khalid Al-Falih, and his dedication to the Saudi energy industry.

“I haven’t lost a friend because he will always remain a friend. He was a schoolmate at university, and we spent 30 years working together,” he said in a voice tinged with emotion.

“You’ve seen Upstairs, Downstairs,” he said, the popular British TV drama. “Well, I am downstairs. I like to work in the kitchen serving my country and my king.”

Most of the audience thought his message went beyond a continuation of existing Saudi energy policy, and amounted to to a “doubling down” of the overall strategic direction in the run-up to the initial public offering of Saudi Aramco, expected imminently.

“It’s the same as before, but reinforced and reinvigorated,” said one oil expert.

On the recent change of management at the top of Saudi Aramco, Prince Abdul Aziz said it was correct to separate the oil company from his ministry. “There is nothing I would not do to protect the interests of this state-owned company,” he said.

“I think the best thing we could do was to ensure the commerciality of the company and the ‘arm’s length’ relationship — to keep it owned by the state and to work as any other international oil company. The IPO made us all focus on exerting every possible effort to highlight this and magnify this.

“That model saved us in terms of our economic well-being. The separation of the corporate from the ministry is a must,” he said, suggesting there would be further safeguards in Aramco IPO documents


This section contains relevant reference points, placed in (Opinion field)

Prince Abdul Aziz said that when Saudi Aramco this year attracted interest of more than $100 billionn for its historic corporate bond, “it was one of the best days of my life.”

There were some surprising elements in his responses to questions from Helima Croft, energy expert from Canadian financial institution RBS Capital. On nuclear power, he made it clear that the Kingdom was keeping all its options open.

“We are proceeding with it cautiously. We are experimenting with two nuclear reactors. We are fortunate enough to have lots of uranium resource and if we scale up we want to go for the full cycle — from producing, enriching and using uranium, even acquiring new technologies….We want to make sure the energy mix is comprehensive,” Prince Abdulaziz said.

On domestic energy reform, he was adamant: “I’m not wasting my time discussing a la la land scenario whether Saudi Arabia will be a net importer of energy by 2030. We have made big improvements in consumption at home, with the energy mix, with efficiency and with price reform. Consumption will be conservatively reduced by 1.5m barrels per day,” he said.

Before his appearance on stage, the prince had reviewed displays at the congress, and lingered to chat casually with journalists at the big Saudi pavilion. “I’m not a horse that can be tamed. I’m known to be excessively spontaneous, a bit of an elephant in the room,” he quipped.

Prince Abdul Aziz also confessed to feeling emotional at the welcome he had received from Suhail Al-Mazroui, the UAE energy minister. “This is a city and a country that gives you a sense of belonging, a sensation of being part of the UAE fabric,” he said.

“I never bet my career on the notion of wanting to be minister of energy. I know energy, I like energy, and I want to be part of that energy, because I get to be energized by it.”


Supporters of ‘Righteousness of Makkah’ campaign honored

Updated 21 min 59 sec ago

Supporters of ‘Righteousness of Makkah’ campaign honored

MAKKAH: Makkah Gov. Prince Khaled Al-Faisal honored the supporters of the “Righteousness of Makkah” campaign during a ceremony held on Sunday.

Prince Khaled ordered the launch of the campaign in all of the region’s provinces at the beginning of the coronavirus disease (COVID-19) crisis, as a continuation of the humanitarian efforts and preventive measures, including the nationwide curfew.

The “Righteousness of Makkah” has contributed to helping needy families and business owners by providing food, health baskets and financial support to more than half a million beneficiaries.

It has also implemented the iftar program aimed at providing iftar meals for 1 million people, which provided 5 million iftar meals during the holy month of Ramadan.

 Prince Khaled also presented 30,000 gifts to security personnel, doctors, health practitioners and field workers across the region, while gifts were also delivered to the doorsteps of 12,000 other beneficiaries.

The ceremony also reviewed a study prepared by Jeddah’s King Abdul Aziz University under the title “Saudi efforts in times of humanitarian crises: The Righteousness of Makkah Initiative, a Model.”

 It discussed the Kingdom’s role in fighting COVID-19 and assessed the campaign’s social impact.

It also focused on several aspects such as the cooperation between the region’s relevant bodies, promoting a culture of volunteering, societal satisfaction, social solidarity, promoting citizenship, meeting the needs of citizens and residents, achieving mental stability and alleviating people’s burdens.

The study showed that the campaign’s hashtag was viewed more than 2.5 million times on social media.

Attendees were then shown a movie showcasing the efforts exerted and the work done by all of the region’s government bodies and relevant sectors since the beginning of the COVID-19 crisis.