Investment in oil development in the North Sea could fall by 50 per cent in the next decade unless changes are made to the regulatory framework, a review commissioned by the UK government has found.
The team behind the review, led by former oil industry official Sir Ian Wood, recommended a new regulatory body is established to get a firmer grip of the situation in the industry.
The new body would work towards maximising collaboration, exploration, development and production over the now fragmented industry.
It has been reported there are now more than 300 oil fields in the North Sea, many of them marginal, competing for the use of an aging infrastructure.
"There is clear consensus that exploration is at a critically low level and badly needs significant new initiatives," Sir Ian said.
According to the report, some 12 to 24 billion barrels of crude oil could be extracted from the North Sea oil fields over the coming decades, with at least three to four billion barrels available to the UK in the next 20 years. This oil would bring about £200bn to the UK economy.
The review said that 42 billion barrels have so far been extracted from the North Sea while investment in the sector reached a record high last year of more than £14bn.
However it found there were "serious underlying problems" with a 38 per cent fall in production between 2010 and 2013 – the equivalent of around 500 million barrels.
Of that, 360 million was due to a rapid fall in production efficiency – which cost the Treasury £6bn in lower tax receipts – while a sharp decline in exploration had led to the equivalent of less than 150 million barrels being discovered over the past two years.
Energy and Climate Change Secretary Ed Davey, who commissioned the review, said he fully accepted the findings and would begin implementing its recommendations immediately.
"The UK government already supports Scottish energy projects worth hundreds of millions of pounds each year, and our large tax and consumer base will ensure that the potential £200bn benefit Sir Ian Wood has identified can be realised," he said.