Thousands of jobs at risk, wages cut and fields becoming uneconomic after cost of a barrel halves in six months

Executives have warned that the North Sea oil industry is close to collapse
This has been caused by the fast and dramatic fall in the price of oil
Government advisor has said that around 10 per cent of jobs may be lost
UK oil and gas sector are estimated to provide more than 450,000 jobs

By Laura Chesters For The Daily Mail

The North Sea oil industry is close to collapse due to the plunging price of crude, executives warned yesterday.

Producers say thousands of jobs are at risk, wages are being cut and fields are becoming uneconomic after the price of Brent crude – the benchmark for oil purchases worldwide – almost halved in six months.

With further falls expected, Robin Allan, chairman of the independent explorers' association Brindex, said the North Sea industry was being pushed to the brink of collapse.

The North Sea oil industry is close to collapse due to the plunging price of crude, executives have said

'It's almost impossible to make money at these prices – it's a huge crisis,' said Mr Allan, who is also an executive at North Sea firm Premier Oil.

'The industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country.'

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Dr Alix Thom, of trade association Oil & Gas UK, warned: 'The fast and dramatic fall in the oil price has exacerbated the issues facing the sector.

'The industry already faced rising operating costs, very little new exploration and a lack of new investment. There are already a large number of fields that are no longer economic due to the current price.'

The UK oil and gas sector and its associated industries are estimated to provide more than 450,000 jobs. North Sea oil and gas tycoon and government advisor Sir Ian Wood said around 10 per cent may be lost.

BP and Shell plus oil services firms Petrofac and Wood Group are all cutting rates for North Sea contractors, with Wood also freezing the pay of its 4,000-strong UK workforce.

Experts say the price fall is costing the industry – largely based in Scotland – billions
 

US giant ConocoPhillips is cutting 230 out of 1,650 jobs in the UK, and oil services firm Schlumberger has cut back its UK-based fleet of survey ships.

A Shell spokesman said: 'The industry has been tackling escalating costs associated with North Sea operations for some time. The current market volatility has made the need to strip costs out of the system more urgent.'

Brent crude hit a low of $58.50 on Tuesday, compared with a June high of $112. The decline has been caused by a rapid growth of US shale output and a refusal by Opec – the powerful Organisation of the Petroleum Exporting Countries – to reduce production. It has made clear it is willing to push prices as low as $40 a barrel.

Experts say the price fall is costing the industry – largely based in Scotland – billions. It also undermines nationalists' claims that an independent Scotland can rely on its oil and gas resources.

- Treasury Chief Secretary Danny Alexander yesterday accused airlines of being too slow to pass on the benefits of falling fuel costs to passengers. He praised Virgin Atlantic for making a £10 cut in the fuel surcharge on long-haul flights and urged all major British airlines to follow suit as quickly as possible.

Drop in oil price should be passed onto the pumps

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