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Saudi Energy Ministry to drop Aramco role

Prince Abdulaziz confirms department will step back from state company's IPO drive

Saudi Arabia’s new Energy Minister Prince Abdulaziz bin Salman has confirmed that his ministry will separate its role from the running of Saudi Aramco as the state oil giant prepares for its initial public offering (IPO).

The ministry will, however, remain the main arbiter of Saudi oil policy and co-ordinate efforts with fellow Opec members and non-producers such as Russia to balance the oil market.

Abdulaziz, in his first public comments after being appointed last weekend to the energy minister role, appeared to indicate that Aramco will be given more leeway in defining its own priorities, including its upstream investment plans.

“I have no doubt in my mind that emphasising the separation between Aramco, the corporate, and the ministry as regulator is a must,” he told delegates at the World Energy Congress in Abu Dhabi.

“The regulator cannot be a person, the regulator has to be an institution. That regulator role has to be defined, and the contours of the role of the regulator have to be understood," he added.

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Up to until now the serving energy minister has dictated production goals and investment strategies at Aramco, while also acting as chairman at what is the world’s largest oil company.

However, Aramco was given a chairman independent of the Energy Ministry last week after a reshuffle that saw then-Energy Minister Khalid al-Falih lose his role as chairman of a company, which is capable of producing 12 million barrels per day of oil.

Falih was then replaced at the weekend by Abdulaziz, who is the son of Saudi ruler King Salman.

It marks the first time a royal has been given the energy portfolio, which has usually been reserved for technocrats with long careers at Aramco.

The decision to separate Aramco from the Energy Ministry comes amid efforts to speed up a partial privatisation of the company, which generates most of the Saudi government's revenues.

Crown Prince Mohammed bin Salman sees the IPO as the pivot of his reform programme aimed at diversifying the economy to make it less dependent on crude exports.

Saudi Arabia is seeking to sell up to a 5% stake by 2020-2021, in what could be the world’s biggest IPO. It is still meeting banks pitching for roles on the deal, and is expected to appoint advisers in the coming days.

Meanwhile, Abdulaziz emphasised the importance of Saudi Arabia maintaining close links with Russia, which has played a crucial part in co-ordinating production curbs with Opec that aim to achieve higher oil prices.

Russian Energy Minister Alexander Novak is planning to visit Riyadh to prepare for President Vladimir Putin’s trip there that is scheduled for October.

"The climax of the visit will be signing so many agreements and really creating a stronger and more sustainable and much more comprehensive alliance with Russia," Abdulaziz said.

"We're talking about a sustainable, perpetual alliance. We will discuss so many things, including our bilateral relationship," he added. Ties between Saudi Arabia and Russia have developed since 2016 after the producer group and a number of non-member countries formed the Opec+ alliance.

Abdulaziz also said his new role will continue with the long-established tradition of consensus building within Opec that brings together a diverse group of producers often with competing political agendas.

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