The change at the top of Saudi Arabian Oil Co., or Saudi Aramco, may be a move to prepare the company for its much-anticipated IPO, but the removal of Khalid Al-Falih may backfire in the eyes of investors.
Al-Falih was relieved of his duties as chairman of Aramco on Sept. 2 in favor of the former governor of the Public Investment Fund of Saudi Arabia, Yasir Al-Rumayyan. Al-Rumayyan is a close ally of Crown Prince Mohammad bin Salman, widely considered to be the driving force behind Saudi policy.
During a conference call with reporters, three senior fellows at the Atlantic Council discussed the potential consequences of replacing Al-Falih, who was also removed as Energy Minister on Sept. 8. While Al-Rumayyan has a background in finance, which ostensibly would be a positive for a company on the verge of an IPO, the trio said Al-Falih's global reputation made him an asset.
"This is a fairly significant move," said Ellen Wald. "This may be a sign the IPO is coming sooner rather than later."
Middle East Institute scholar Jean-Francois Seznec said it was the first time in a half-century that the head of Aramco was not an engineer, which has greater consequences for the company than it would most major oil and gas producers.
"I think it will hurt the IPO, this change in leadership," he said. "To run a company like Saudi Aramco, you need an engineer. I think the market will have a very negative view of this … I think the markets will see this is as a move for the kingdom, and particularly Mohammad Bin Salman, to raid the profits of Saudi Aramco."
Wald said Al-Rumayyan will be counted on to lead the company in a fashion closer to that of a western CEO, playing a major role in exactly how Aramco will invest its capital and make the company more appealing to investors. His personality, she noted, may endear him to both investors and employees.
"He's very different than his predecessor [Al-Falih] … who is viewed as sort of harsh," she said. "He's very well-liked by the employees."
While the removal of Al-Falih from the Energy Ministry as well as his job with Aramco comes as a surprise to many, his usefulness to the kingdom may not be over. David Hobbs suggested Al-Falih may reappear in another role to get a segment of the Saudi economy that is underperforming back on track.
"Al-Falih was known as one of the most effective technocrats," he said. "Khalid Al-Falih is one of the guys you go to when you want things done. ... He doesn't get a lot of sleep."
