FEARS have been raised over the future of oil and gas production in the North Sea as experts warn the industry is "at the edge of a chasm".

Trade body Oil & Gas UK claims exploration for new reserves remains at an all time low with no sign of improving, while almost half of all oil fields will fail to cover their costs this year if current oil prices prevail.

A report published today by the body also shows that revenues fell by almost a third in 2015, despite a rise in production and a 42 per cent cut to costs - prompting fears that the "worst may be yet to come".

Less than £1 billion of fresh capital for exploration is expected to be approved in 2016, compared to an £8bn average over the last five years.

Pressure is now mounting on the UK Government to cut taxes for the industry in a bid to attract investment and minimise losses during the downturn.

Oil and Gas Uk chief executive Deirdre Michie said: "We are an industry at the edge of a chasm."

She added: "Together we need to transform the basin into a highly competitive, low tax, high activity province, which is attractive to a variety of operators and sustains and supports the important supply chain based here.

"We have a huge task ahead but the prize is worth fighting for. The UK Continental Shelf (UKCS) still holds up to 20 billion barrels of oil equivalent (boe) 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."

The price of oil has plummeted by 70 per cent since summer 2014 to around $30 a barrel.

The report warns that if that price remains static for the rest of this year, around 43 per cent of oil fields are likely to be operating at a loss, deterring further exploration and investment.

The downturn has already resulted in tens of thousands of job losses in the North Sea over the last two years, with further cuts predicted.

Trade union Unite warned the report shows that the slump is far from over and "the worst may still be yet to come".

Regional Officer Tommy Campbell said: "We agree that emergency tax measures should be implemented by the Chancellor so we can give North Sea oil and gas production and the work force a fighting chance for the future.

"However, the savings generated from these breaks must be focused as a priority on the defence of existing employment, skills retention and standards and to sustain the North Sea as a high-skill, high-wage sector.

"It’s too late for tens of thousands of workers across the oil and gas sector who have already lost their livelihoods but tens of thousands more are reliant on the next steps of our political leaders and they are desperately looking for commitments and common purpose."

The UK Government announced tax cuts for the industry just last year in a move which saw rates on older oil and gas fields reduced from 80 per cent to 75 per cent, while newer fields saw a cut of 60 per cent to 50 per cent.

In January, the UK and Scottish Governments also announced a £250 million 'city deal' for Aberdeen in a bid to boost the industry.

A UK Government spokesman said: "This government is clear that the broad shoulders of the UK are 100 per cent behind our oil and gas industry and the thousands of workers and families it supports.

"In January this year we announced a further package of measures including another £20m funding for a further round of seismic surveys and our strategy to maximise economic recovery of the UKCS.

"We look forward to the industry capitalising on this, to deliver efficiencies and make the industry more robust now and for the future."