The US military says a special energy unit has taking over supervising oil imports to Iraq, ending a controversial Pentagon deal with Halliburton.
KBR's fuel was nearly double the price of Iraqi fuel
The move comes after an official report saying a Halliburton subsidiary, which has close links to the White House, may have overcharged for fuel deliveries.
The subsidiary, Kellogg Brown & Root, was awarded the contract to supply the military without competitive bidding.
The Pentagon said the change was not linked to doubts over the KBR deal.
The new body overseeing the imports, the Defence Energy Support Center, said it would seek to put competitively awarded contracts in place as soon as possible.
A draft audit found evidence that KBR may have overcharged US taxpayers $61m
to supply fuel to Iraq from Kuwait.
Houston-based oil services giant Halliburton - run by Dick Cheney until he successfully ran for the office of Vice President in 2000 - strongly denies wrongdoing.
US democrats have criticised the Pentagon's contract with KBR saying it was an example of favouritism.
The US Army Corps of Engineers, which previously oversaw the oil imports, will remain in charge of up to $2bn worth of contracts to rebuild Iraq's oil industry.
KBR was awarded the open-ended reconstruction deal in March without tendering as an extension of a pre-existing contract with the Pentagon.
It was the only contractor that could commence implementing the complex contingency plan on such short notice, according to a statement on KBR's website.