Houston-based oil services company Tam International is reducing its presence in Iraqi Kurdistan due to stalling investment in oil and gas exploration and development, according to a source close to the company.

“International oil companies aren’t being paid. As a result they aren’t investing in exploration and development,” said the source. “This has made the business environment for companies like Tam very challenging.”

International oil companies (IOCs) are owed around $3bn by the Kurdistan Regional Government (KRG).

Tam is currently in the process of shipping drilling equipment out of the country, according to the source. The company is reducing the number of employees working in the country, but will maintain an office in the region.

“The company is going to maintain an office in the region and may still take on work, but it won’t use its own equipment,” the source said.

Tam has been working in Iraqi Kurdistan since 2006.

“The market for oil and gas service companies like Tam picked up serious momentum in 2011 and 2012,” the source said. “Over 2014 security problems caused some projects to stall, but what has really killed the market is the KRG’s failure to pay IOCs and the subsequent lack of investment.”

The latest decision by Tam to cut its presence in Iraqi Kurdistan comes amid an ongoing fiscal crisis in Iraqi Kurdistan that has left the region’s government struggling to pay civil service salaries.

Over 2014 the KRG ran a large budget deficit after Baghdad froze payments to the KRG due to a disagreement over independent oil sales. At the same time an escalation in the war against the militant group Islamic State of Iraq and Syria (ISIS) led to increased spending on defence.