Although the UK oil industry may be ‘close to collapse’ due to the plummeting prices of crude, the economy as a whole may benefit from the situation, experts have said.
Stating that the UK oil industry is virtually "close to collapse", Robin Allan, chairman of the independent explorers' association Brindex and director of Premier Oil, said the only way for the struggling sector to survive is halt new projects and cut jobs.
"It’s almost impossible to make money at these prices" he told BBC.
"It's a huge crisis. This has happened before, and 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.”
He warned that in a situation where a barrel of oil sells at a record low of £38, no new investment will flow into the sector. He also said oil companies are likely to announce widespread job cuts in the upcoming weeks.
"Budgets for 2015 are being cut by everyone," he remarked.
However, consultancy company PricewaterhouseCoopers (PwC) believes the shattered oil prices could bring about some benefits for the economy as a whole, despite the losses in the oil and gas sector itself.
"In essence, an oil price fall acts like a tax cut for the economy, but a particularly favourable one in the sense that the burden of lost revenue is primarily borne by the major oil producers such as the Opec member countries and Russia,” explained PwC chief economist John Hawksworth.
"Of course, the UK is still a significant oil producer, but we are now a net oil importer, so there should be a net benefit to our economy as a whole, even if there are some losers in the UK oil and gas sector (and in particular places like Aberdeen).”
According to Hawksworth, a sustained decrease in the price of oil by £32 could help raise the UK GDP by up to 3 per cent.
UK consumers are already reaping the benefits with falling inflation pushing up spending power, providing a knock-on effect for suppliers of consumer goods, he said.
While the oil prices have plummeted, gas prices remain "relatively favourable" and provide "great opportunities" for investment, North Sea-focused company Independent Oil and Gas (IOG) Plc said as it announced it is increasing its gas resources off the east coast of England.
The Department of Energy and Climate Change (DECC) has extended a licence in the southern North Sea by 12 months to allow IOG to complete the acquisition of the Cronx gas well and begin drilling as soon as possible.
"The current environment provides great opportunities for IOG,” said Mark Routh, chief executive and interim executive chairman of IOG.
"This is the right time to increase the size of the commercial resources in our Southern North Sea Hub centred on the Blythe discovery and take advantage of the relatively favourable gas price environment and the falling rig rates, reducing development costs."
Oil veteran Sir Ian Wood last week predicted job losses in the North Sea over the next 18 months as the company he founded, the Wood Group, announced a pay freeze and a cut in contractor rates.
ConocoPhillips is cutting 230 out of 1,650 jobs in the UK. Goldman Sachs predicted big oil firms would have to cut capital expenditure by 30 per cent to restore their profitability and Schlumberger cut back its UK-based fleet of geological survey ships.