After 20 years, Opec bids farewell to Saudi Arabia oil supremo

[DUBAI] Saudi Arabian oil minister Ali al-Naimi, the architect of the 2014 switch in Opec policy that's since roiled the energy market, companies and entire economies from Mexico to Nigeria, is leaving his post.

An 80-year-old who rose from modest Bedouin roots, Mr al-Naimi headed the ministry for almost 21 years, steering the world's largest crude exporter through wild price swings, regional wars, technological progress and the rise of climate change as a key policy concern.

"During my seven decades in the industry, I've seen oil at under US$2 a barrel and US$147, and much volatility in between," Mr al- Naimi told a gathering of the who's who of the American oil industry in February in Houston.

"I've witnessed gluts and scarcity. I've seen multiple booms and busts."

The departure of Mr al-Naimi, who for years could move markets just by uttering a few words, is the latest sign of how the country's young Deputy Crown Prince Mohammed bin Salman is stamping his authority over oil policy.

Khalid Al-Falih, chairman of Saudi Arabian Oil Co, the state-owned producer, will replace him as minister of energy, industry and mineral resources. Mr Al-Falih is known to be close to King Salman and to Prince Mohammed.

"Khalid has been integral to the current oil policy of Saudi Arabia and has worked very closely with the deputy crown prince," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University in New York and a former White House oil official.

Oil Policy

While Mr al-Naimi enjoyed a relatively free hand to implement oil policy under King Fahd and King Abdullah, his room for manoeuvre seemed to have narrowed since last year's accession to power by King Salman and the growing influence of his 30-something son, Prince Mohammed.

At the April 17 meeting in Doha where producers discussed a possible production freeze to shore up prices, Mr al-Naimi lacked authority to complete a deal, according to his Russian and Venezuelan counterparts. The view of Prince Mohammed, who had insisted that no accord was possible without Iran, eventually prevailed and the talks collapsed.

Almost 18 months before, it was Mr al-Naimi who pushed the Organization of Petroleum Exporting Countries to leave output unchanged. Rather than cut back to sustain prices near US$100 a barrel, Mr al-Naimi's plan squeezed higher-cost producers, particularly US shale-oil drillers.

The strategy is showing signs of success: the number of active US oil drilling rigs has dwindled by a record amount, shale production is falling and companies of all sizes, including Exxon Mobil Corp, are cutting investment. But Saudi Arabia itself has paid a great price, with foreign-exchange reserves plummeting and economic growth slowing.

Savvy Minister

The approach has also left Opec in tatters, pitting wealthy Gulf Arab countries, including Kuwait and Qatar, against cash-strapped nations like Venezuela and Nigeria. The 13-member group, once a mighty organization capable of roiling the global economy by keeping oil prices high, seems to have become largely ineffective.

Mr Al-Naimi presided over a golden oil age for Saudi Arabia and Opec. The group's oil revenue soared almost 10-fold during his tenure to US$1 trillion in 2014, according to the US Energy Information Administration. He was also an astute diplomat, and with the support of his long-time No 2, Prince Abdulaziz bin Salman - an older half-brother of the deputy crown prince - Mr al-Naimi bridged differences with Iran and Venezuela in the late 1990s, orchestrating a series of production cuts that lifted oil prices, eventually sending them above US$100 a barrel.

Morning Jogs

Whenever Opec gathered at its Vienna headquarters, Mr al-Naimi drew the biggest swarm of journalists. Reporters tagged along each day at dawn for his habitual jog, or in later years, speed-walk, along the Austrian capital's downtown Ring Road. A few words from him during those walks could move oil markets and more, swaying currencies and Wall Street.

"When he talks, everybody in the market is listening because he has a track record of delivering on any promise," said Noe Van Hulst, the former secretary general of the Riyadh-based International Energy Forum.

"He is the most credible voice within Opec and in the market."

Mr Al-Naimi has said he'd like to devote more time to his other job, chairman of the science and technology university in Saudi Arabia, an institute that studies and prepares for a post-hydrocarbon world. He was also appointed adviser to the royal court on Saturday.

Humble Origins

"The problem is the harmful emissions we get from burning coal, oil and gas" he said on Feb 23 in Houston.

"The solution is to work on technology that minimizes and ultimately eradicates harmful emissions. Some don't accept this view, but I have faith in technology."

From humble origins in the Saudi desert, Mr al-Naimi went on to become one of the most influential voices in global energy policy and markets. His parents were divorced before he was born, and he lived with his mother's tribe, taking care of little lambs. After the death of his brother, he took over his job at age 11 as an office boy for Arabian American Oil Co, the forerunner of Saudi Aramco.

The company, owned at the time by American corporations, sent him back to school, first in the kingdom, then to Lebanon and later for graduate studies in geology at Lehigh University and Stanford University in the US.

At Aramco, he climbed through the ranks to help the company expand beyond producing raw crude and into processing oil overseas and distributing refined products. He was promoted to president in 1984, the first Saudi to hold the post, and was named chief executive officer four years later. The government selected him to lead the ministry in August 1995.

Avid Fisherman

Outside the world of oil, his passions include his grandchildren and fishing. In 2009, he told the USambassador in Riyadh that "he found out he had been named Petroleum Minister while fly-fishing in Alaska," according to a diplomatic cable made public by WikiLeaks.

For most of his tenure, Mr al-Naimi advocated keeping crude prices at levels acceptable to the US and other importers. He often disagreed with counterparts from Iran and Venezuela, who sought higher prices by limiting supply. He worried that strategy would choke off demand.

As oil began falling in the summer of 2014, Mr al-Naimi had an unsettling flashback to three decades earlier, when Saudi Arabia was the industry's so-called swing producer, adjusting its own output to defend world prices. His predecessor, Ahmad Zaki Yamani, decided in 1983 to push Opec to cut back as producers outside the group pumped more. That, Yamani theorized, would increase prices.

The results were catastrophic: Oil collapsed to US$7.90 a barrel from about US$40 as non-Opec supplies expanded. Saudi production dropped by almost two-thirds in 1985, to 3.6 million barrels a day from 10.3 million in 1980.

It was a lesson that shaped Mr al-Naimi's response to the more recent collapse in crude prices, triggered by the surge in US output.

"I saw how prices fell, so we lost on output and on prices at the same time," he said at a March 2015 conference in Riyadh, referring to the experience of the 1980s.

"We learned from that mistake."

BLOOMBERG