WE are a witness to monumental changes! And the Saudi energy sector is no exception. It is also undergoing massive structural changes - at an unprecedented pace. With Saudi Arabia, the world's largest crude oil exporter and the Opec kingpin, crucially and strategically important to the global energy balance, the energy world remained glued to Riyadh, trying to decipher and understand the impact of the management changes on Saudi oil policy. A number of measures - directly connected to the energy world - were announced over the last few days. Saudi Arabia's Supreme Economic Council approved a restructuring of global oil giant Saudi Aramco, separating it from the oil ministry, it was revealed on Friday. “Saudi Supreme Economic Council agrees on Deputy Crown Prince Mohammed bin Salman's vision of restructuring oil-giant Aramco,” it was reported in the press. “Restructuring of Saudi Aramco includes separation from petroleum ministry.” Also a 10-member supreme board, led by Deputy Crown Prince Mohammed bin Salman, was announced to oversee the company's affairs. The Supreme Petroleum Council, which previously set oil policy and was led by the king, will be dissolved, the statement clarified. Earlier on Wednesday, King Salman announced appointing Saudi Aramco's chief executive, Khaled Al-Falih, as chairman of the state oil firm and health minister. Amin Nasser was inducted as the acting CEO. Falih has been the CEO of Aramco since January 2009. He has been with the company for more than 30 years, and as CEO he has worked to modernize the company, making it more like its Western rivals. “He has been the CEO of Aramco, and he's a man of considerable capability and breadth, and he is really respected throughout the oil world,” Daniel Yergin, was quoted in the international press as saying. And despite all the upheaval and the restructuring in Riyadh, the industry veteran, the octogenarian Petroleum Minister Ali Al-Naimi, known for his characteristic regular brisk walks in Vienna - during Opec ministerials - often pursued by a posse of reporters hanging on his every word - continues to steward the Saudi energy affairs. Despite some buzz within the energy fraternity about him hanging his boots and soon enough - he continues - providing a sense of continuity and stability to the energy world - in these rather turbulent times. In continuing with him, the King has once again reposed full confidence in him! Having served as the kingdom's oil minister since 1995, Ali Al-Naimi is widely viewed as the mastermind behind Opec's decision in November not to cut oil production below its current level of 30 million barrels a day, which would have reduced supply and bolstered prices that had been plunging since late June 2014. That the markets are showing some life now - underline that the policy was working. In recent days too, Saudi Arabia has been underlining; it would keep pumping oil to meet any demand for its supplies as it seeks to defend its share of the market. The oil market is in “excellent” condition, Prince Abdulaziz Bin Salman, Saudi Arabia's deputy oil minister, told reporters on Monday in Al-Khobar. The kingdom seeks to keep customers happy and maintain stability of prices, demand and supply, he emphasized. “Saudi Arabia is interested in maintaining its share in the market and interested in keeping its customers,” Prince Abdulaziz said. “We will supply any demand for Saudi oil, as we are interested in the stability of the market. Stability includes price, supply, and demand stability,” he added. “Saudi Arabia responds to demand in the market,” Prince Abdulaziz added. “We will provide oil to whoever asks for it.” Minister Ali Al-Naimi has been at the forefront - leading the Saudi campaign to let market forces determine the oil prices and not the traditional lever of OPEC output. He too had been stressing in recent months that the Kingdom won't yield market share to higher-cost producers. Riyadh hence continues to pump at elevated levels. It pumped at close to a record pace in March, the International Energy Agency reported on April 15. To many, Minister Ali Al-Naimi's survival is also a signal that King Salman was satisfied with Saudi oil policy, and that the restructuring in Riyadh were unlikely to affect Saudi oil production policy. “I don't think there's been any disagreement (within the Saudi leadership) about the idea of keeping up production, maintaining market share, refusing to be a swing producer,” Clement M. Henry, a professor at the Middle East Institute of the National University of Singapore was quoted by Reuters as saying. John Kilduff of Again Capital says the changes in Saudi Arabia appear supportive of the price of oil, which has begun to be more impacted by geopolitical events in recent weeks. Eugen Weinberg, head of commodity research at Commerzbank, is of the view that although it was too early to tell, yet any output change in Saudi policy were unlikely, given hints about supplying extra oil to Asia. “The focus should remain on its (Saudi Arabia's) market share and the latest talk by (Ali al-Naimi) seems to support this view along; ‘we stay ready to supply more to Asian clients thanks to their stronger demand',” he told CNBC. “I don't think it (the changes) will have much impact,” Thomas Pugh, commodities economist at Capital Economics, was quoted by CNBC as saying. And there are already hints that the Kingdom is already working to increase its production capacity. James Williams, an energy economist at WTRG Economics, is of the view that the most recent data from Baker Hughes shows that Saudi Arabia had 125 active oil and gas rigs in March of this year, up from 96 the same time a year earlier. The total represents an all-time high, according to Williams. He emphasized the number of active oil rigs is at a record too. The rig count has climbed despite the fact that the “world market was still flooded with oil,” Williams said. “This indicates that the Saudis are expanding production capacity,” he noted. One of the hallmarks of the Saudi oil policy has been stability and continuity. Despite some major changes at the top in Riyadh, the signals emerging are that Riyadh would continue to bet on the same. The oil policy of the Kingdom is not expected to undergo much change - at least in the shorter term.
