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North Sea Faces £12bn Investment Collapse From Oil Price Slump

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Andrew Critchlow, The Daily Telegraph

Offshore industry in the UK has lost 65,000 jobs but companies now adapting to lower oil price, says Oil and Gas UK

Oil company investment in the North Sea is expected to slump by up to £4bn per year through to the end of 2018 as operators slash costs to compensate for lower prices, the industry trade body has warned.

In its latest economic report on the North Sea, Oil and Gas UK said that 15pc of the offshore industry’s workforce – equal to 65,000 jobs – has been lost since the beginning of last year as oil companies cut back amid a 50pc slump in prices to around $50 per barrel.

Deirdre Michie, Oil and Gas UK’s chief executive, said: “Last year, more was spent than was earned from production, a situation which has been exacerbated by the continued fall in commodity prices. This is not sustainable and investors are hard-pressed to commit investment here because of cash constraints.”

The trade body said that exploration for new resources in the North Sea has fallen to its lowest level since the 1970s. It has warned that with so few new projects gaining approval, capital investment is expected to drop from £14.8bn last year by between £2bn and £4bn in each of the next three years.

“The industry is under a lot of pressure and it is now widely recognised that a transformation in the way business is done is required if the UK sector is to become more resilient and competitive in a world of sustained lower oil prices,” said Ms Michie.

Jobs are being lost at a record rate in Aberdeen

Despite the cuts in investment, Oil and Gas UK said that output from the region has increased. Initial figures from the Department of Energy and Climate Change show that production increased by around 3pc in the first half of the year compared with the same period in 2014. Last year, output from the UK Continental Shelf averaged 1.49m barrels per day of oil equivalent, which is a measure that includes gas.

This was the first increase in production by the region in the past 15 years, said Oil and Gas UK.

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