BP has reportedly slashed $1 billion off its development budget for the giant Rumaila field in Iraq as that country’s government warns that terrorist threats and low prices may delay payments to oil companies.
A source close to the matter told Reuters BP has struck a deal with the Iraqi government to cut its 2015 development budget for the oilfield to $2.5 billion, down from its initial budget of $3.5 billion.
The field is operated by South Oil Company, BP, PetroChina and Iraq’s state owned SOMO.
Production at Rumalia is expected to hold steady at about 1.4 million barrels per day this year.
In December, BP said production at the giant field is expected to plateau at 2.1 million barrels per day by 2020.
The field has produced over 2 billion barrels of oil since starting up in 2009 and holds an estimated 20 billion barrels of recoverable reserves.
Low oil prices and ongoing clashes with Islamic State are squeezing Iraq’s coffers and may make it difficult for the government to pay upstreams operating in the country.
Oil producers in Iraq are paid a fixed fee by the government tied to the volume of oil produced.
Some foreign companies are weary of ramping up investments in the oil rich country due to a lack of infrastructure and payment delays.
Earlier this year, the Iraqi government asked firms operating in the country to consider putting new projects on hold and delay projects that have already been finalized as rising production costs hammer the government’s bottom line.
A senior Iraqi oil ministry official told Reuters in March that those requests may result in energy firms cutting Iraq spends by millions of dollars.