Easwaran Kanason

Co - founder of NrgEdge
Last Updated: September 25, 2019
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Business Trends
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The furore over the drone attack on the heart of Saudi oil infrastructure which shook the oil world, glossed over another important development in the heart of the Saudi oil world. Khalid al-Falih, the public face of the Saudi Arabia’s oil riches who had presided over countless OPEC and global negotiations, has fallen. Replaced swiftly by loyalists to Crown Prince Mohammad bin Salman, the shake-up heralds a new era for Saudi Arabia’s leadership in the oil world.

To understand the gravity of the situation, you have to consider the responsibilities of Khalid al-Falih. Serving as CEO of Saudi Aramco from 2009 - 2015 and as the all-powerful Minister of Energy, Industry and Mineral Resources from 2016 (while simultaneously being the chairman of Aramco), al-Falih was possibly the most powerful person in the oil world during this period. And one of the most respected as well. Responsible to corralling quarrelsome OPEC members and crafting the OPEC+ club to lift crude prices from their 2014 nadir, al-Falih had a reputation that inspired confidence. In fact, in the fallout of the Jamal Khashoggi assassination, al-Falih was tasked with restoring assurance in the Kingdom for a restless audience immediately after at the Davos in the Desert conference in Riyadh.

That was just a year ago. And now al-Falih is gone. The affair rolled out in stages. At first, it was announced that the single Ministry of Energy, Industry and Mineral Resources would be split into two – one for energy and one for industry and mineral resources. At that point, it was assumed that al-Falih would remain the head of the new, smaller Ministry of Energy in charge of energy policy. A couple of days later, al-Falih was replaced as chairman of Saudi Aramco by Yasir al-Rumayyan, the head of the country’s powerful sovereign wealth fund. Again, it was assumed that this split had to happen due to the impending Aramco IPO that would require separation between energy policy and energy operations.

Then the axe fell.

Four days later, al-Falih was dismissed as the Minister of Energy, replaced with a member of the Crown Prince’s inner circle, Prince Abdulaziz bin Salman. The purge was complete. With members of the Crown Prince’s inner circle now occupying the key positions, the stage was set for the Vision 2030 national plan, to transform the Saudi Arabian economy away from oil dependence. To accelerate al-Falih, with his more measured approach, was seen a roadblock. Past performance was ignored, and the change came swiftly, as it does in Saudi Arabia.

But the lead-up to that change was more nuanced. Al-Falih played a key role in crafting the Vision 2030 strategy. Under him, Saudi Aramco embarked on a massive downstream expansion that included securing stakes in key refineries in strategic markets and took over petrochemicals giant SABIC. But there he also made some decisions that apparently did not go down well the Crown Prince. Chief among this was his reticence to push forward with Aramco’s planned IPO hastily, which placed him directly in opposition to the impatient Crown Prince’s demands for dynamism. And with oil prices still subdued despite al-Falih’s best efforts to whip OPEC+ into shape, al-Falih’s position had been weakened. 

In a world where the Crown Prince of Saudi Arabia demands results yesterday while al-Falih was preparing for a careful tomorrow, one had to go. So, with all positions in place to accelerate Saudi Arabia’s development plans, it should be pedal to the metal now. But without more considered approach, will the Crown Prince be able to sustain control of this speeding vehicle as al-Falih did in the past?

 Khalid al-Falih’s career in a snapshot:

  • Joined Saudi Aramco in 1979
  • Elected to Saudi Aramco Board of Directors in 2004
  • Appointed CEO of Saudi Aramco in 2009
  • Appointed Minister of Energy, Industry and Mineral Resources in 2017
  • Dismissed from all positions in September 2019

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Crown Prince of Saudi Arabia Prince Salman Khalid al-Falih Sabic Aramco Saudi Arabia Prince Abdulaziz bin Salman
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The United States consumed a record amount of renewable energy in 2019

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In its Monthly Energy Review, EIA converts sources of energy to common units of heat, called British thermal units (Btu), to compare different types of energy that are more commonly measured in units that are not directly comparable, such as gallons of biofuels compared with kilowatthours of wind energy. EIA uses a fossil fuel equivalence to calculate primary energy consumption of noncombustible renewables such as wind, hydro, solar, and geothermal.

U.S. renewable energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Wind energy in the United States is almost exclusively used by wind-powered turbines to generate electricity in the electric power sector, and it accounted for about 24% of U.S. renewable energy consumption in 2019. Wind surpassed hydroelectricity to become the most-consumed source of renewable energy on an annual basis in 2019.

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Hydroelectric power is almost exclusively used by water-powered turbines to generate electricity in the electric power sector and accounted for about 22% of U.S. renewable energy consumption in 2019. U.S. hydropower consumption has remained relatively consistent since the 1960s, but it fluctuates with seasonal rainfall and drought conditions.

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operating natural-gas fired electric generating capacity by online year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

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natural gas-fired electric gnerating capacity by retirement year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

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operating natural gas-fired electric generating capacity in selected states

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

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global energy consumption for power generation

Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)

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Because IEO2020 is based on the IEO2019 modeling platform and because it focuses on long-term electricity market dynamics, it does not include the impacts of COVID-19 and related mitigation efforts. The Annual Energy Outlook 2021 (AEO2021) and IEO2021 will both feature analyses of the impact of COVID-19 mitigation efforts on energy markets.

Asia infographic, as described in the article text


Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)
Note: Click to enlarge.

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