The British oil sector just had its worst year since the 1970s
A new report published today by Oil and Gas UK, the industry lobby group, said that "rising costs, taxes and inadequate regulation have taken their toll on the UK industry's international competitiveness."
The industry is asking the government to take action to pass measures much needed to "secure new investments and address the collapse in exploration," claiming that there are still "significant untapped resources" in the British offshore sector.
According to Oil and Gas UK, there are about 3.7 billion of barrels oil equivalent (boe) to be drilled, but that at the end of 2014 only 2 billion of those were likely to be developed.
"Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground," said Malcolm Webb, Oil and Gas UK chief executive.
Rising costs in the industry meant that operating expenditure rose by almost 8% in 2014, while profits fell to about £24 billion, their minimum level since 1998. The North Sea industry spent £5.3 billion more than it collected, the worst performance since the 1970s.
The cost of extraction of a single barrel has risen to £18.50 ($29.59), a price that is not profitable when crude oil sold at less than $60 a barrel.
Webb said that: "Even at $110 per barrel, the ability of the industry to realise the full potential of the UK's oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation. At current oil prices, we now see the consequences only too clearly."
Speaking to the BBC, a spokesperson from the government said that the government understands how important the North Sea sector is, both in terms of job creation and in benefits for the British economy.
"The package of fiscal changes and initiatives announced by Treasury in early December shows the government understands the challenges and is on the front foot in dealing with them," the spokesperson said.
The crisis of the oil sector is particularly hurting Scotland, where most of the industry is based. Last week, Scotland first minister Nicola Sturgeon said that: "The UK government has failed to address the exploration problem."
The latest estimates from the Office of Budget Responsibility also showed production forecasts continue to drop dramatically:
