LONDON, Feb. 23 (UPI) -- A British industry body said the North Sea energy sector is in for a long period of decline, with less than $1.4 billion in new spending expected in 2016.
A report from Oil & Gas U.K. finds exploration activity offshore is at an all-time low and there are no signs of improvement. Less than $1.4 billion in spending on new projects is expected in 2016, compared with an average of around $7 billion in the last five years.
The group's chief executive, Deirdre Michie, said North Sea oil and gas fields are entering a phase of "super maturity," and while the opportunity for recovery exists, lower crude oil prices are adding insult to injury.
"We have a huge task ahead but the prize is worth fighting for," she said in a statement. "The continental shelf still holds up to 20 billion barrels of oil equivalent, which can continue to provide a secure supply of energy for the country, support hundreds of thousands of jobs, generate several billion pounds in corporate and payroll taxes from the supply chain and stimulate countless technological innovations."
Exploration and production, known as the upstream part of the sector, was at its highest in 10 years in 2015, though drilling activity is expected to fade in 2016. Total spending, meanwhile, is expected to decline from around $16.5 billion last year to about $12.7 billion in 2016.
British energy company BP said this year it was reducing its North Sea headcount as it moved to streamline operations during the market downturn. Last week, Wood Group, which provides support for the upstream sector, said it was trimming its rates for North Sea contractors.
Michie warned that, if crude oil prices stay around the $30 per barrel mark for the rest of the year, more than 40 percent of the fields in service in the North Sea will be operating at a loss.