Page last updated at 06:43 GMT, Wednesday, 11 February 2009

Credit crunch 'hits oil industry'

Oil platform - generic
Oil and Gas UK said the industry faced tough times

The banking crisis is going to hit exploration and development in the oil industry over the next 12 to 18 months, a report has warned.

Oil and Gas UK blamed the situation on a combination of low oil prices and the freezing of capital markets.

The assessment comes after a survey of 75 companies. The organisation called for the industry and government to act.

Last week Aberdeen and Grampian Chamber of Commerce forecast major job losses in oil and gas over the next year.

Companies have said that despite high oil prices last year the cost of developing and producing UK oil and gas had risen substantially.

The Oil and Gas UK survey suggested that only a third of new developments under consideration will break even at current costs.

Dropping prices

The organisation's chief executive, Malcolm Webb, said the industry was at the crossroads.

Mr Webb said it needed urgent government help and should concentrate in the short-term on mitigating the effects of the downturn.

But he said he was hopeful that talks with ministers would mean a range of measures being announced soon.

The economic slowdown has curbed demand for fuel around the world.

The current price of oil is more than $100 below the record price of close to $150 a barrel seen last July.

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