Less than half of the oil and gas being produced in the North Sea could be economically viable, according to a leading industry figure.

Sir Ian Wood said low prices driven by global supply outstripping demand has led to the current downturn in the Scottish oil and gas market.

He said: "I think there's much more talk now of how much can we produce at $55-60 as opposed to, let’s batten down the hatches for $75-80.

"That's a big challenge. I'm going to guess right now that at the present price less than half of the oil and gas being produced in the North Sea is viable."

Sir Ian's comments come as the industry faces its most challenging period for decades.

When the oil industry first came to Aberdeen in 1975, it led to the city becoming one of the most prosperous in the country.

But many believe producers are now in the grip of the most serious crisis the industry has ever experienced.

China is no longer consuming oil at the rate it was, and the boom in shale oil means America is less reliant on imports. Meanwhile, key producers such as Saudi Arabia are refusing to curb their output, leading to a glut in the market - which is driving the price down.

Trevor Garlick, BP's head of North Sea operations, said: "It's pretty challenging. When you think about the cost to run a field and the cost to develop a field, for many companies you add those two costs together and that is equivalent to the current oil price.

"So, it is very difficult in this current oil price to make a positive profit and make positive cash."

The global outlook spells bad news for the North Sea industry, where oil is becoming increasingly difficult and expensive to extract.

Companies were already being warned to cut costs, and the falling oil price has accelerated that process, triggering mass redundancies.

Jake Molloy, RMT regional organiser, said: "It's the worst I’ve seen in 35 years.

We've seen them all come and go, peaks and troughs, peaks and troughs, but this is a trough that I don’t think we've even seen the bottom of yet and it’s going to run for some considerable time."

There have been several slumps since oil firms first arrived in Aberdeen. In 1986, the local property market went into meltdown when many redundant workers left the city.

In the past the industry has managed to bounce back, but some believe this downturn is different.

Economist Tony MacKay said: "The industry's not expecting any significant increase in oil prices and I think we therefore have to accept that the boom in Aberdeen is over."

The future is the subject of much debate. But what is clear is the impact this current slump is having right across the north east.

Source: news.stv.tv

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