LOW oil prices are not a "blip," the head of the the UK's main oil industry body has warned.

 

 

Malcolm Webb, the chief executive of Oil and Gas UK, said North Sea oil should not be seen as a "cash cow" for the Treasury and voiced fears that exploration would remain "abysmally low" without greater support from the Government.

Oil prices have fallen from around $115 per barrel last June to under $60, its lowest level for five years.

Analysts have predicted a further slump to below $50 this year while oil companies have warned of job losses and wage cuts.

Interviewed on Sky News, Mr Webb said prices would recover "eventually" but added: "However, this precipitous fall over the last six months or so is causing significant problems and particularly for a relatively high cost area such as the North Sea."

The said the industry had to reduce costs but would also require ongoing support from the Government.

He criticised successive governments for failing to regulate the industry effectively and imposing "unsupportable" taxes on the North Sea.

He praised recent proposals to overhaul regulation and reduce tax but added: "The problem again is one of speed, we need this to happen much more quickly than was originally envisaged by the government."

Asked how falling demand in China and high levels of production in the Middle East would impact on future prices he said: "This doesn't look like a blip.

"We've got two million barrels a day of excess production on the market so it doesn't look as though it is going to be quick I'm afraid, it's going to take some time for the market to correct."

Warning that taxes - which produced £12billion for the Treasury in 2011 - would fall below £3billion this year, he said: "We must stop looking at the North Sea as a big cash cow for the revenue, what we need to look upon is its broad economic contribution and it has got a very, very significant one to make."

Speaking on the same programme, Deputy First Minister and Finance Secretary John Swinney said oil prices would recover to $110 per barrel.

He insisted the falling price of oil would not have impacted on an independent Scotland's finances as, under SNP plans, the country would not formally have left the UK until 2016 in the event of a Yes vote in the referendum.

The SNP has faced criticism over its independence blueprint, which was based on an oil price of $113 per barrel, following the plunge in prices.

Scottish Labour's finance spokewoman Jackie Baillie said: "As oil drops to half the price of the SNP's predictions, it's becoming clear that John Swinney is increasingly out of touch with the reality of the crisis in the oil industry in Scotland.

"The jobs of thousands of Scots are at risk. "The oil workers deserve better than the SNP's pretence that everything will be alright on the night.

"The idea that this is irrelevant to the economics of separation because we would still be part of the UK would be laughable if it wasn't so serious. John Swinney can't bury his head in the sand when the livelihoods of thousands of oil workers are at stake."

Scottish Labour has called on the Scottish Government to publish an assessment of the impact of oil prices on jobs.

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