Narsi Ghorban, a prominent Iranian energy analyst from London University, expressed concerns over the cut in oil budget, saying it could inflict long-term damage on the industry.
Ghorban said slashing the budget will cause a drastic decline in oil operations and the domino effect will make Iran lag behind its plans for the key sector, which is the country's main source of revenue, Shana reported.
"The decline in oil output will consequently reduce the country's prospects in the race with regional producers who have geared up to increase their international market share," he said.
The total amount of general resources in the budget approved by the parliament stands at 4.43 quadrillion ($95 billion). However, the budget allocated to the Oil Ministry for the next fiscal year (starting March 21) stands at 1.55 trillion rials ($33.10 billion).
Ghorban noted that the best way to avoid the potential risks looming over the oil sector is to attract foreign finance.
According to the energy analyst, domestic players do not have the capacity to undertake operations on their own, so finding foreign investors to help drive the oil and gas sector forward is inevitable.
"If we do not embark on finding foreign investors, we will face serious challenges keeping the wheels of the oil industry spinning," he said.
Ghorban's views are in line with Oil Minister Bijan Namdar Zanganeh's proposed strategies.
"Attracting foreign investment will top the ministry's agenda in the next four years," Zanganeh had said.
"Promoting investment to develop joint hydrocarbon reserves through agreements with multinationals and completing the value chain in petrochemical industry are high-priority issues."
To do so, a new contract dubbed Iran Petroleum Contract has been introduced, which stipulates a role for domestic oil and gas equipment manufacturers.
Based on the terms of IPC, Tehran will sweeten its contracts for foreign companies if they incorporate more Iranian firms in their development projects. Foreign firms that come to Iran should select an Iranian firm as partner.
Experts believe such terms could utilize the potential of domestic companies as the main or secondary contractors.
Zanganeh believes that as long as Iranian oil and gas equipment producers do not interact with foreign firms, they will not be able to play a key role in the global energy market.
