Scottish and UK ministers come under pressure to intervene as one of the oil industry's most senior figures warns it is in "huge crisis" thanks to plummeting prices.A senior British energy official says the UK's oil industry is "close to collapse" due to a recent dramatic fall in crude prices.
"It's close to collapse. In terms of new investments - there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks,” said Robin Allan, the chairman of the independent explorers' association Brindex.He added that the plunge in oil prices pushed the industry into “crisis” and oil companies are cutting staff and investment to save money.
“Budgets for 2015 are being cut by everyone," he said.
"It's almost impossible to make money at these oil prices," Allan told the state-run 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 said.
The sudden decrease in prices also stems from faltering global demand and the refusal of some producers, particularly Saudi Arabia and some other Persian Gulf monarchies, to cut their current output.
Brent crude futures tumbled for the seventh consecutive session as of 18 December, to reach just above $58/bbl, while the WTI US crude contract touched its lowest level since May 2009.
In 2013 and 2012, oil prices averaged $100/bbl.
Last week, government adviser Sir Ian Wood said he predicts a wave of job cuts over the next 18 months as oil firms struggle to cope with the price collapse.
UK oil and gas production has been in decline since 1999, which has resulted in many exploration companies investing heavily in the search for new fields and creation of new extraction projects.
US multinational investment banking firm Goldman Sachs said the plunge in oil prices could threaten USD 930 million of investment in new oil projects. As a result, new oil output could be cut by 7.5 million barrels a day, or eight percent of the current demand, by 2025.