Saudi Arabia government overhaul sees oil minister removed Published duration 7 May 2016

image copyright AFP image caption King Salman is planning for life beyond oil profits

Saudi Arabia's King Salman has removed the country's veteran oil minister as part of a broad government overhaul.

Ali al-Naimi has been replaced after more than 20 years in the role by former health minister Khaled al-Falih.

Saudi Arabia, the world's largest crude exporter, unveiled major economic reforms in April, aimed at ending the country's dependence on oil.

About 70% of its revenues came from oil last year, but it has been hit hard by falling prices.

The government shake-up, announced in a royal decree, sees a number of ministries merged and others, such as the ministry of electricity and water, scrapped altogether.

A public body for entertainment is being created, and another for culture.

King Salman's son Prince Mohammad directs the country's economic policy, and Mr al-Naimi's removal is an indication that he wants tighter control over the commodity, says BBC World Service Arab Affairs editor Sebastian Usher.

Mr Falih has spent more than 30 years working at state oil giant Aramco, most recently serving as chairman.

He will take charge of a new department managing energy, industry and mineral resources.

Analysis: Rob Young, BBC News

For 20 years, Ali al-Naimi was regarded as the most powerful figure in the global oil industry. He ran the biggest exporter of crude, Saudi Aramco, and was seen as being able to drive the price of oil on the markets through the producers' group Opec.

Over the past few years, he has been involved in a battle to protect Saudi Arabia's share of global oil sales in the face of competition from newer producers in the US. His refusal to cut oil production led to a glut of supply - more than the market needed. This resulted in a sharp fall in the price of oil, and so cheaper petrol at the pumps. It has also meant the Saudi kingdom has earned less money.

Ali al-Naimi has characterised this as a fight to secure oil sales in the long term, one he hopes Saudi Arabia will win and US fracking companies will lose. But it is a gamble. The fall in the price of oil has been much more extreme - and longer-lasting - than many analysts expected.

Industry watchers want to know if Ali al-Naimi's replacement at a new energy ministry - Khaled al-Falih - will keep his predecessor's policy or change it. Traders will be listening carefully to his every word. Mr Falih's strategy could drive the future path of oil prices.

Difficulties ahead

Long years of oil profits has allowed the Saudi government to offer generous benefits and subsidies to its citizens.

But with another huge budget deficit forecast this year, last month saw the approval of wide reforms including plans to create the world's biggest sovereign wealth fund and widen the participation of women in the workforce.

Many of the changes announced by King Salman in this overhaul focus on areas where reforms have been promised.