Drone attack on Saudi oil facilities: Biggest disruption in three decades

The drone attack on Saudi Aramco’s Abqaiq oil processing facilities on Saturday almost destroyed the plants. It resulted in a direct disruption of nearly 5.7 million barrels of oil per day from Saudi Arabia to the world.

Put in context to the overall daily supply of crude oil, which was 99.24 million barrels per day (mbpd) in August 2019 (Opec data), this disruption was more than 6 per cent of global oil supply.

The Iraqi invasion of Kuwait , which had kicked off the Gulf War, did not affect supply cut to the extent the Saturday attack did.

Saudis replace Aramco chairman with wealth fund boss ahead of IPO

Saudi Arabia removed Energy Minister Khalid Al-Falih from his position as Chairman of Saudi Aramco, the second time his role has been cut back in less than a week, as the government prepares to sell shares in the state-owned oil company.

Al-Falih will be replaced by Yasir Al-Rumayyan, head of the sovereign wealth fund, according to a Tweet from Al-Falih’s account. The appointment of Al-Rumayyan, already an Aramco board member and a key adviser to powerful Crown Prince Mohammed Bin Salman, will seperate the Ministry of Energy from Aramco and avoid conflicts of interest as the company prepares for the upcoming initial public offering, according to a source familiar with the thinking behind the decision.

Selling a stake in Aramco, which could be the world’s largest IPO, is a key part of Prince Mohammed’s plan to wean the Saudi economy off reliance on oil. Plans for the IPO were put on hold last year as Aramco focused on the $69 billion acquisition of a majority stake in a state chemical maker. The kingdom’s de facto ruler has said he expects Aramco to be valued at over $2 trillion, but analysts see $1.5 trillion as more realistic.

Still, the IPO process accelerated again after Aramco completed a $12 billion bond sale in April. International banks started pitching for a role on the IPO last week, people familiar told Bloomberg.

“I suspect they want to accelerate the IPO timeline,” said Helima Croft, chief commodities strategist at RBC Capital Markets. The Saudi authorities want to “bring a sense of urgency to the issue as this is a big signature initiative of Crown Prince Mohammed.”

The move to split oversight of Aramco from the Energy Ministry ends decades of tradition and further reduces Al-Falih’s portfolio after he lost the industry and mining functions in a government reshuffle on Friday. It also highlights the growing importance of the Public Investment Fund, which is set to receive proceeds from the Aramco IPO to reinvest both inside and outside the kingdom.

“I congratulate my brother His Excellency Mr. Yasser Othman Al-Rumayyan,” Al-Falih’s Tweet said. It’s “an important step to prepare the company for the public offering, wishing him every success.”

When he was first appointed energy minister in 2016, Al-Falih directed a U-turn in Saudi policy in the face of a U.S. shale boom and tumbling crude prices. He led the Organization of Petroleum Exporting Countries to agree to reduce output for the first time in eight years, starting in January 2017, and persuaded other big producers including Russia to join in the cuts. After failing to re-balance the market, Al-Falih organized extensions of the curbs, involving roughly 60% of the world’s oil output, through March 2020.

“All this shows that in Saudi Arabia there has been some dissatisfaction at the highest levels on how things have been going,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland. “Al-Falih has not really fully delivered on oil prices. He hasn’t delivered the price that’s required by the Saudi budget. There’s speculation that prices and the IPO are linked and they need higher prices to get the valuation they want for the IPO.”

The country needs crude to trade near $80 a barrel to balance its budget, according to research from the International Monetary Fund and Bloomberg Intelligence. It also needs higher oil prices if it’s to achieve a valuation at least close to what Prince Mohammed set as a target.

To bolster prices, Saudi Arabia has cut production to less than 10 million barrels a day as part of its agreement with OPEC to limit output. Al-Falih helped broker the deal that brought other producers like Russia into the effort to balance markets by curbing production. The Saudis are doing most of the heavy lifting to support the deal, pumping about 500,000 barrels a day less than they pledged.

Al-Rumayyan, a former banker with Saudi Fransi Capital, is governor of the PIF, as the sovereign fund is known, leading it’s transformation from a sleepy domestic holding company into one of the biggest investors in global technology start-ups. The fund has accumulated stakes in electric carmaker Tesla Inc., ride-sharing company Uber Technologies Inc. and has made a $45 billion commitment to SoftBank Group Corp.’s $100 billion technology fund.

The kingdom’s original plan, announced by Prince Mohammed in 2016, was to sell about 5% of Aramco on the Riyadh exchange and at least one international bourse. The listing was pushed back to 2020 or 2021 to allow Aramco to complete the $69 billion acquisition of Saudi Basic Industries Corp.

Big blow to Indians: Saudi Arabia may ban foreigners from hospitality jobs

Saudi Arabia plans to restrict certain hospitality jobs to its own citizens by the end of the year, banning the recruitment of foreign workers for those positions.

The decision, announced in a Labour Ministry statement on Friday, will apply to resorts, hotels rated three stars or higher, and hotel apartments rated four stars or higher. Positions that must be filled by Saudis range from front-desk jobs to management. Among the exceptions are drivers, doormen and porters, the ministry said in the statement. Other jobs that will be restricted to nationals include restaurant host and health club supervisor.

As Saudi Arabia tries to develop its fledgling tourism industry, its also tackling citizen unemployment, which hit a high of nearly 13 percent last year. Hospitality is the latest sector to face stricter Saudization policies, which call for replacing the foreigners who dominate many parts of the private sector -- particularly blue collar and service jobs.

Officials say such policies are necessary to create jobs for Saudis in a country that’s relied heavily on cheaper foreign labour. However, some businesses complain that Saudization increases the cost of hiring and lowers productivity.

The decision will be enforced from an Islamic calendar date likely to correspond with December 29. Many hotels had already begun hiring Saudis to fill front-desk jobs in recent years, part of a gradual cultural shift as Saudis begin to take up jobs that once would have been considered undesirable. 

Restrictions, reforms: How Saudi Arabia's treatment of women has evolved

Saudi Arabia on Monday marks one year since it allowed women to drive for the first time, a flagship reform as the petro-state seeks to overhaul its ultra-conservative image.

But a number of policies remain in place which leave male relatives in charge of major decisions affecting women's lives.

Saudi Arabia's so-called guardianship system places the legal and personal affairs of women in the hands of their fathers, brothers, husbands and even sons.

Women require the formal permission of their closest male relative to enrol in classes at home or to leave the country for classes abroad.

In July 2017, Saudi Arabia's education ministry announced girls' schools would begin to offer physical education classes for the first time, providing they conform with Islamic law.

The ministry did not specify whether girls would need permission from their guardians to take part.

Saudi Arabia has several women-only universities.

Restrictions the guardianship system has long imposed on women's employment have been loosened as Saudi Arabia tries to wean itself from its dependence on oil.

Crown Prince Mohammed bin Salman, named heir to the throne in June 2017, has promoted an economic plan known as "Vision 2030", which aims to boost the female quota in the workplace from 22 to 30 per cent by 2030.

King Salman, his father, has signed decrees allowing women to apply online for their own business licences. The Saudi police force now also employs female officers.

Women still require a male guardian's permission to renew their passports and leave the country.

But on June 24 last year, women took the driver's seat for the first time in the kingdom's history.

While the end of the driving ban was largely welcomed, it did not signal an opening up of political freedoms.

Several women's rights activists, including veterans campaigners for the right to drive, were detained just weeks earlier and later put on trial on a host of charges including speaking to foreign journalists.

Under the guardianship system, women of all ages require the consent of their male guardian to get married.

A man may divorce his wife without her consent.

In January, the Saudi justice ministry said courts were required to notify women by text message that their marriages had been terminated, a measure apparently aimed at ending cases of men getting a divorce without informing their partners.

In January 2018, women were allowed into a special section in select sports stadiums for the first time.

They had previously been banned from attending sporting events.

Saudi Arabia has also reined in its infamous morality police, who for decades had patrolled the streets on the lookout for women with uncovered hair or bright nail polish.

Some women in the capital, Riyadh, and other cities now appear in public without headscarves.