Letter sent to international oil companies
- Iraqs Oil Ministry faces budget cuts
- It has told international oil companies working on its southern oil fields to cut spending
- Reduced spending is expected to affect future production
Iraqs Oil Ministry has told international oil companies (IOCs) to cut spending on crude production, according to media reports.
A letter sent to Texas-based ExxonMobil, the UKs BP, Italys Eni and UK/Dutch Shell informs them that the government has sharply reduced the funds available to the Oil Ministry, with corresponding spending cuts, according to a report by the Wall Street Journal.
The Oil Ministry has urged the IOCs to resubmit reduced spending plans to develop major oil fields in the south of the country as reimbursement will be affected by the cuts.
Iraq has struggled to pay IOCs in recent years, and owed them $22bn in May 2015.
Oil accounts for about 40 per cent of Iraqs GDP and more than 90 per cent of government revenues, according to the US Fitch Ratings. Due to the fall in oil prices to below $50 a barrel, Iraqs government debt is expected to reach 51 per cent of GDP by the end of 2015. The battle against the jihadist group Islamic State in Iraq and Syria (Isis), which occupies three of the countrys 18 provinces, has been a major drain on resources.
Baghdad had planned to stem falling oil revenues by increasing its oil production to 3.6 million barrels a day (b/d) in 2015, 3.8 million b/d in 2016 and 4.2 million b/d in 2017. But the spending cuts are expected to affect production.