New super ministry would allow a coordinated strategy across the energy and industrial sectors
- Super ministry would oversee natural resources, heavy industry and utilities
- Overarching body may be led by current assistant oil minister Prince Abdulaziz bin Salman
Plans to create a new super ministry to oversee Saudi Arabias energy sector are under way in a move that could have huge political and economic ramifications for the kingdom.
Speculation is growing that the new ministry will have a far-reaching mandate that will cover natural resources, heavy industry, and power and water generation under the stewardship of assistant oil minister Prince Abdulaziz bin Salman.
Talks are still at an early stage, but the news follows the decision by the powerful Council for Economic & Development Affairs, chaired by Deputy Crown Prince Mohammed bin Salman, to separate state oil firm Saudi Aramco from the Oil Ministry.
Former Aramco CEO Khalid al-Falih took over the chairmanship of Aramco from Oil Minister Ali al-Naimi, and if the new ministry is created, it will likely be the kingdoms major revenue generator.
A new ministry has been talked about for some time and it would make a lot of sense from an operational standpoint, says Sadad al-Husseini, former head of exploration and production at Aramco. It would allow for a coordinated strategic approach across the energy and industrial sectors.
Aramcos plan is to lengthen the domestic value chain and this involves a huge investment in its downstream operations. Recent spending includes the $20bn Sadara chemical complex in Jubail as well as more than $30bn-worth of refinery schemes.
The oil major is also extremely active in the power sector and is constructing the worlds largest integrated gasification combined-cycle power plant at Jizan.
In addition, Aramco is responsible for supplying highly subsidised oil and gas for power generation and industrial use. This means a new ministry could manage these sectors and the subsidies much more efficiently.
According to a source at a major firm in the kingdoms power sector, the creation of an overarching energy body would have operational and, ultimately, economic benefits as domestic demand for electricity continues to soar.
You could say [the creation of a super ministry] is about time, says the source. Aramco is in charge of oil exports and providing fuel for domestic power, but has no say on domestic power production or electricity tariffs, which will become increasingly important issues moving forward.
A new super ministry would also play an important role in directing the kingdoms alternative energy efforts. Although plans to develop renewable energy on a large scale appear to have been dropped, Riyadh intends to press ahead with an ambitious 17.9GW nuclear energy programme to help meet forecast demand.
Appointing Prince Abdulaziz bin Salman to run the new ministry would be a controversial choice for some given that he is the fourth son of King Salman bin Abdulaziz al-Saud. In the princes favour is the fact he has been working with the Oil Ministry for 28 years and is said to be a popular figure. He has worked closely alongside Al-Naimi for decades and is still relatively young at 55.
Prince Abdulaziz is based in Riyadh, knows Opec and the oil business, and will be able to maintain policy and stability, which puts him at an advantage.
However, traditionally, members of the royal family are kept away from the oil sector, and there are some observers who believe that appointing Prince Abdulaziz would give King Salmans immediate family too much influence.
It would mean two of [King Salmans] sons controlling almost every key sector in the kingdom, says a Riyadh-based economist. If it goes ahead, it should be seen for what it is, a power grab.
The Oil Ministry was unavailable for comment when contacted by MEED.