OPINION: Saudi Oil Minister Khalid al-Falih has had his wings clipped in a major Cabinet reshuffle that concentrates economic powers in the hands of allies of Crown Prince Mohammed bin Salman.

A polished diplomat, Falih, however, is likely to remain central to Saudi oil policy despite being stripped of his broad powers over the economy.

He lost the chairmanship of state-oil giant Aramco and stewardship of the Industry & Mineral Resources Ministry, which until now had been part of his portfolio.

There is, however, a silver lining. The diminished role will enable Falih to do what he is good at — ensuring high oil prices by using his persuasive powers to co-ordinate production curbs by Opec and non-Opec members such as Russia.

The sweeping Cabinet changes, involving the promotion of high-flying allies of the Crown Prince, may also help speed up the long-delayed initial public offering (IPO) of Aramco, the partial flotation of which remains a key plank of the Saudi government's economic diversification drive.

Falih’s replacement as Aramco chairman, Yasir al-Rumayyan, is governor of Saudi Arabia's Public Investment Fund (PIF) and, owing to his long career as a banker, may be better qualified than Falih to pull off the IPO.

Rumayyan established his business acumen by transforming the once-sleepy fund into one of the biggest investors in global technology start-ups.

As part of his ambitious economic plan, the Crown Prince picked Bandar Alkhorayef, an accomplished industrialist, to head the new Ministry of Industry & Mineral Resources.

Analysts believe the government overhaul is primarily aimed at getting the stalled Aramco IPO off the ground since it remains the major signature initiative of the Crown Prince, the effective ruler of the kingdom. The partial sale is expected next year or in 2021.

Falih is a shrewd politician who has displayed a sense of unease about an Aramco listing, fearing it will expose the kingdom’s crown jewel to possible litigation in the US.

However, the Crown Prince sees the partial privatisation as vital to his reform plans, which aim to wean the economy off oil revenues and create jobs for a fast-growing population.

The Crown Prince is especially keen on enhancing his domestic popularity by ploughing money into the economy at a time of foreign policy disasters in recent years.

He expects Aramco to be valued at over $2 trillion but analysts see $1.5 trillion as more realistic.

The Crown Prince’s military campaign in Yemen has failed to subdue pro-Iran Shia rebels who hold sway in the capital Sanaa, while his alleged role in the 2018 murder of dissident Saudi journalist Jamal Khashoggi in Istanbul has tarnished his international standing.

Despite Falih’s demotion, the long-time technocrat is expected to steer Saudi oil policy as the prince will need his diplomatic skills to ensure high oil prices.

When Falih was appointed energy minister in 2016, he performed a U-turn in Saudi oil policy in the face of booming US shale production.

He succeeded in leading Opec to agree to supply cuts for the first time in eight years, starting in January 2017.

Subsequently, he persuaded other big producers, including Russia, to join in the cuts, which are still in place.

Saudi Arabia's heir apparent, therefore, needs Falih’s balancing acts to prop up a falling oil market by using his rapport with Russia and keeping a recalcitrant and old-time foe, Iran, on board.

(This is an Upstream opinion article.)

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OPINION: Falih remains key despite reshuffle