The appointment of Prince Abdulaziz bin Salman, half brother to de facto ruler Crown Prince Mohammed bin Salman, comes as Saudi Arabia prepares for a much-anticipated stock listing of state-owned oil giant Aramco.
“Khalid al-Falih has been removed from his position,” the official Saudi Press Agency said, citing a royal decree.
“His royal highness Prince Abdulaziz bin Salman is appointed minister of energy.”
The kingdom also replaced the deputy energy minister, SPA added.
Since his appointment as oil minister in 2016, Falih has been the face of Saudi energy policy but the veteran technocrat had seen his portfolio shrink in recent weeks.
His ouster comes just days after he was removed as chairman of Aramco as the company prepares for a much-touted initial public offering (IPO).
He was replaced in that post by Yasir al-Rumayyan, governor of the kingdom’s vast Public Investment Fund.
Falih’s powers were diminished last month when the world’s top oil exporter announced the creation of a new ministry of industry and mineral resources, separating it from his energy ministry.
It was widely speculated there was dissatisfaction with Falih within the top levels of government over the low price of oil ahead of the Aramco IPO — even as the kingdom has continued to cut output to balance global demand.
‘Wealth of experience’
OPEC and its allies are scheduled to meet in Abu Dhabi on September 12 to review their strategy on limiting production to tackle a global supply glut and shore up prices.
It was unclear whether there would be a change in Saudi policy under Prince Abdulaziz, who joined the oil ministry in the 1980s and has served in a variety of senior positions.
“Prince Abdulaziz has been in the oil ministry for decades… He joined the oil ministry in the late 1980s and worked closely with the three previous oil ministers,” said Ali Shihabi, founder of the now-shuttered pro-Saudi think-tank Arabia Foundation.
“(He) has attended virtually every OPEC meeting since then so brings a wealth of institutional experience.”
His appointment further concentrates power within the family of King Salman. His other son Prince Mohammed controls all the major levers of power and is heir to the Arab world’s most powerful throne.
And his younger son, Prince Khalid bin Salman, serves as deputy defence minister.
Aramco is stepping up efforts to float around five percent of the company, in what could potentially be the world’s biggest stock sale.
It aims to raise up to $100 billion based on a $2 trillion valuation of the company, but amid low oil prices investors have debated whether Aramco is really worth that much.
Failure to reach a $2 trillion valuation as desired by Saudi rulers is widely considered the reason the IPO, earlier scheduled for 2018, has been delayed.
The planned IPO forms the cornerstone of a reform programme envisaged by Crown Prince Mohammed bin Salman to wean the Saudi economy off its reliance on oil.
Saudi Aramco has not announced where the listing will be held, but London, New York and Hong Kong have all vied for a slice of the much-touted IPO.
The oil giant is considering a two-stage IPO, with a domestic debut and a subsequent international listing possibly in Tokyo, the Wall Street Journal reported last month.