Development costs for foreign oil companies have been slashed by more than 60 per cent after negotiations with international oil companies (IOCs), according to oil minister Adel Abdel Mahdi.

In a statement published online he said that costs had been cut to $9bn from $23bn.

According to Abdel Mahdi most foreign oil companies operating in Iraq had approved the revised costs, after engaging in negotiations.

The cost-cutting comes amid a financial crisis in Baghdad as low oil prices reduce government revenues while military spending has been increased due to ongoing fighting with the Islamic State of Iraq and Syria (Isis).

Iraq’s existing technical service contracts see international oil companies paid a flat fee for each barrel of oil produced.

As a large proportion of IOC development costs are passed on to the government, Iraq’s oil ministry has asked foreign oil companies to consider delaying projects so no new costs are incurred.

Around $13.1bn in costs was paid to IOCs in 2014 and $13.6bn was paid in 2015, according to Abdel Mahdi.

Projects that have been delayed amid the negotiations over cost cuts include a $2.5bn oilfield development project at BP’s Rumaila oilfield.

A $4bn project to develop the West Qurna-2 oilfield, which is operated by Russian oil company Lukoil, has also seen delays.

On 19 January Iraq’s oil ministry announced that it was discussing reducing financial spending by foreign companies operating within service contracts – whilst minimizing the impact on hydrocarbon production.

Iraq is OPEC’s second-largest producer and generates 95 percent of its public budget from oil sales.