RIYADH - The head of Saudi Arabia's government-owned postal service said on Wednesday the institution was setting up new distribution centres as part of a privatisation process he indicated could take several years.

The kingdom is launching a privatisation drive in many sectors as part of wider economic reforms aimed at boosting efficiency and easing pressure on state finances in an era of cheap oil.

Saudi Postal Corp, which has more than 10,000 employees, sent a request for proposals to local banks in January. Telecommunications minister Mohammed al-Suwaiyal last year said that its privatisation was likely to start by early 2017.

Officials announced on Wednesday that Saudi Postal was transferring its central distribution centres to the kingdom's three international airports in Riyadh, Jeddah and Dammam in an effort to improve efficiency and performance.

The centres are expected to be operational within 24 to 36 months, they said.

Saudi Postal's president, Mohammed al-Abdul Jabbar, described the centres as "fundamental" to the privatisation process.

"If we look at the privatisation programme, you will find processing centres among the primary projects," he told reporters.

"The transformation process is composed of several stages. Part of it is to prepare the institution and its abilities in anticipation of privatisation."

Abdul Jabbar said that other steps might take until 2025 to be completed, implying that different parts of the institution could be sold off at different times.

The government hopes that privatisation will allow the state to cease financial support for Saudi Postal.

Annual government subsidies to the business are projected to fall to zero by 2020 from 2 billion riyals ($533 million) now, while boosting performance to lift its revenue to 2.75 billion riyals in 2020 from 1.02 billion riyals in 2015.

(Reporting By Stephen Kalin; Editing by David Goodman) ((stephen.kalin@tr.com; +971 52 322 9759; Reuters Messaging: stephen.kalin.thomsonreuters.com@reuters.net))