NEW LEADERSHIP AT SAUDI ARAMCO

S E C R E T RIYADH 001655 NOFORN SIPDIS C O R R E C T E D COPY CAPTION DHAHRAN SENDS STATE FOR NEA/ARP & EEB E.O. 12958: DECL: 11/03/2018 TAGS: ENRG EPET PGOV PINR SA SUBJECT: NEW LEADERSHIP AT SAUDI ARAMCO Classified By: DHAHRAN CONSUL GENERAL JOSEPH A. KENNY FOR REASONS 1.4 ( B),(D) ¶1. (S) Summary: On November 2, Petroleum and Mineral Resources Minister Ali Ibrhaim al-Naimi announced that Khalid Abdulaziz al-Falih has been appointed as the new president of Saudi Aramco, succeeding Abdallah Salih Jum'ah who held the position for fourteen years. When al-Falih, a relatively young technocrat, was appointed to the newly created position of Executive Vice President of Operations in September 2007, industry insiders saw it as a clear indication that Aramco had chosen their future leader. This long-term approach to succession planning is a reflection of the company's well-organized and deliberate strategy to identify and groom future generations of top executives. See paragraph 11 for a link to Al-Falih's official Aramco biography. End Summary. -------------- New Kid on the Block -------------- ¶2. (S) On November 2, Petroleum and Mineral Resources Minister Ali Ibrahim al-Naimi announced the long anticipated appointment of Khalid Abdulaziz al-Falih as the new president of Saudi Aramco. Several reputable Consulate General Dhahran contacts have commented that although the King officially appoints the new head of Aramco by royal decree, al-Naimi made the actual choice. The General Manager for Government Affairs at Saudi Aramco and official liaison between Saudi Aramco and the consulate, Khalid Abubshait, confirmed that Abdallah Salih Jum'ah, the current president of Aramco, will retire on December 31 and will be succeeded by al-Falih. ¶3. (S) Oil and gas industry insiders have speculated that once Aramco created al-Falih's new position last year and consolidated the core operations under his supervision it was all but guaranteed that he would be the next president. When al-Falih formally takes over the presidency, his current position of Executive Vice President of Operations will be eliminated and all of the senior vice presidents of the seven business lines will report to al-Falih. ¶4. (S) Dr. Sadad al-Husseini, a former top executive at Saudi Aramco and a well-known industry expert, told EconOff that al-Falih's technical expertise as a trained engineer and former project manager had made him the most likely pick for the top job. The very well-connected al-Husseini said that al-Naimi, a geologist by training, believes that someone with a technical understanding of the hydrocarbon industry should fill at least one of the two most influential positions in Saudi Arabia's petroleum industry: petroleum minister and Aramco president (his own current and previous jobs). Over the past thirteen years, al-Naimi's technical expertise has provided a balance to Jum'ah's business management background. According to al-Husseini, by choosing al-Falih, a fellow technocrat, al-Naimi is ensuring that Aramco's core competencies (oil and gas extraction and exploration) will be looked after and well-managed well into the next decade. ¶5. (S/NF) A well-positioned employee in Aramco's powerful Management Services Support Division stated that al-Falih made his mark in 2001 when he was Aramco's chief negotiator responsible for the high profile joint ventures that would eventually explore for gas in the Empty Quarter of southeastern Saudi Arabia (Rub al-Khali). He worked closely with al-Naimi and successfully achieved the minister's main objective, which was to defend Aramco's control over most undiscovered hydrocarbon reserves. (Comment: He was so successful that most major international oil companies walked away from the proposal. End Comment.) The consulate's source said that along with al-Falih's ascension to the presidency, a number of other relatively young (50-60 years old) executives will fill or already have encumbered top leadership positions throughout the company. He describes this new leadership group as very opinionated, smart and anxious to take over the reins of Aramco. He said that during a recent meeting he attended with a group of these new executives, one of them exclaimed, &We're in charge now!8 This underscores the attitude among the new wave of Saudi managers. -------------- Farewell Mr. Jum'ah -------------- ¶7. (S/NF) Although Jum'ah is widely considered to have been a very successful and progressive leader; he will finally step down from the top spot at Aramco after fourteen years in the job. Several consulate contacts have offered different reasons leading to Jum'ah's retirement from Aramco. The General Manager of Government Affairs for Aramco, Khalid Abubshait, suspects that the King will appoint him to a ministerial position in the SAG, possibly Minister of Labor, though he is not certain that Jum'ah actually wants the position. It is widely rumored that Jum'ah has had some health problems, particularly with his back, which may have contributed to his decision to retire. Finally, other contacts suspect that Jum'ah will pursue personal business interests in either Bahrain or a rumored real estate venture on the coast south of Khobar in the Eastern Province. The consulate has not heard any reports of Jum'ah being forced out of his position unwillingly. -------------- Planning for the Succession of Leadership -------------- ¶8. (S/NF) In a meeting with the CG and EconOff, a key consulate source in Aramco directly involved in high level promotion decisions described in detail the process with which the company identifies and prepares its most promising young employees for future leadership positions. One Aramco division is responsible for continuously evaluating and positioning a pool of 62 top prospects to eventually take over key executive management positions, specifically the seven senior vice president spots that run Aramco's business lines. These top candidates are chosen through a pyramid-like vetting system that begins with each low-level office identifying its most promising employee. Then, these potential prospects from across the entire company are evaluated by a panel of department heads and a smaller group of candidates are chosen to advance to the next level of assessment. This process continues until thousands of promising employees from across the company are reduced to a small pool of 62 people. This &trickle up8 process is managed by coordinators in the Management Services Support Division. In order to avoid the nepotistic nature of Saudi tribal allegiances, which has been a problem in the past (even for Aramco),all of the coordinators responsible for managing this pool of candidates are of Western nationalities, mostly American. ¶9. (S/NF) This process developed as a response to so-called &blockers,8 who are described as unpromising and under-performing managers whose lack of upward mobility hindered the next generation of talented Saudis from quickly ascending the ranks. The solution, according to the consulate's informed source, was to identify these &blockers8 and re-assign them to less relevant positions. In turn, these up and coming executives are hand-picked to fill specific jobs where they are expected to gain diverse and relevant professional experience. They generally remain in any given position for a relatively short period of time, not longer than five years. During this entire process, the employee is unaware that they are being groomed for a leadership position. It is through this process that al-Falih rose up through the ranks so quickly and deliberately. ¶10. (S) Comment: Minister al-Naimi's decision to appoint Khalid al-Falih as Aramco's president appears to be by all counts a competent and solid choice. Many of the consulate's contacts in the Eastern Province business community have seen al-Falih's appointment as a prudent decision and have not criticized him in any capacity. By not following the same nepotistic tendencies that remains prevalent in other sectors of the government and society, al-Naimi and the SAG have sent a clear signal that Aramco will continue to operate as a world-class firm, akin to the profit-oriented oil majors in the private sector. The systematic and merit-based evaluation and promotion of promising young employees throughout Aramco further bolsters this assertion. End Comment. -------------- -------------- Saudi Aramco Official Biography of Khalid al-Falih -------------- -------------- ¶11. (U) Find official biography at www.saudiaramco.com in Corporate Management under "At A Glance" tab. RUNDELL