THE UK Government is “playing politics with the future of the North Sea oil industry”, an oil expert has said.





Westminster leaders have waited until the General Election is in sight before making moves to save the flagging industry, Alex Russell, professor of petroleum accounting at Aberdeen’s Robert Gordon University, said.





“The UK Government has been very slow. They are trying to time it just prior to the General Election. They are playing politics with the future of the North Sea oil industry,” he said.





Russell called on Westminster to reduce taxes immediately on companies operating in the North Sea as the industry struggles to deal with rock-bottom oil prices.





“The pace of change from Westminster has been just dire, absolutely dire,” he added.





Russell’s comments came as the UK offshore oil and gas industry reported its worst annual performance for four decades.





Industry body Oil & Gas UK said falling oil prices and rising costs meant the sector spent and invested £5.3 billion more than it earned from sales during 2014.





That outflow of cash was the biggest since massive investment in platforms in the 1970s preceded the flow of oil.





The body’s annual survey also indicated that annual investment in the industry could fall as low as £2.5bn annually within three years, once the current wave of large projects enters production.





Drilling is also set to fall, with much exploration postponed indefinitely as oil hovers around $60 per barrel.





Oil & Gas UK said the “bleak” findings emphasised the urgency of government action to secure the industry’s long-term future.





The report claimed that cost and efficiency measures need to improve by up to 40 per cent per barrel of oil if there is to be a sustainable future for the UK’s offshore sector.





Malcolm Webb, Oil & Gas UK chief executive, said: “Even at $110 per barrel, the ability of the industry to realise the full potential of the UK’s oil and gas resources was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation.





“Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground.”





In December, the UK Government reacted to falling oil revenues by announcing a cut of two percentage points in the tax rate paid by oil and gas companies, to 30 per cent.





Yesterday, a UK Government spokesman said that these moves showed Westminster “understands the challenges and is on the front foot in dealing with them”.





But oil experts said that Westminster has been far too slow to react to the burgeoning crisis.





“The UK Government has been very tardy about making things happen,” Russell said, adding Westminster should reduce corporation tax for North Sea oil and gas companies to 20 per cent.





Scotland’s energy minister Fergus Ewing also called for “urgent action on taxation and regulation” to protect jobs and investment in the North Sea.





Ewing said that “exploration levels must improve and long-term investment must be sustained to ensure that sufficient new production comes on stream.”





About 450,000 people are employed directly and indirectly in North Sea oil and gas, with around half those jobs in Scotland. The impact of falling oil prices has been most keenly felt in Aberdeen.





Many companies operating in the North Sea have laid off staff and slashed contractor rates. Last month, Oil & Gas UK warned that as many as 35,000 jobs may be lost in the North Sea.





“These are tough times, no doubt about it,” one oil worker in Aberdeen told The National. “There must have been on aggregate 1000 job losses announced by major operators and that’s before you look at the smaller operators.





“There is a lot of uncertainty. A lot of operators have made everyone re-apply for their jobs.





“There is a pay freeze. That’s the first time I’ve seen that since I worked in the oil industry. Contractors’ rates are being cut by up to 20 per cent.”





The downturn is not just being felt on the rigs. Hotel prices in Aberdeen, notoriously high, have tumbled. Owners of newly built hotels worry about to how to fill rooms as oil and gas companies look to cut costs. Bars and restaurants in the city are quieter.





Despite the oil downturn, Aberdeen remains the most expensive city in the UK. Over the past year, Dave Simmers, chief executive of Community Food Initiatives North East, has seen a huge increase in numbers coming to the food bank he runs near Aberdeen’s docks.





While few, if any, of those coming for packages of dried pasta and long life milk worked in the North Sea, the oil and gas industry’s travails is having a significant impact on the food bank. The fruit and veg social enterprise that helps fund it makes about 85 per cent of its income from oil and gas companies. Orders from the industry are down, including a £7,000 monthly purchase from one firm.





“Companies are cutting back on costs they don’t need to incur. It is tough at the moment,” said Simmers. “It is not just jobs lost in the industry, it is the knock-on effect.”





Meanwhile, Russell warned that the greatest threat facing the North-East is the loss of expertise built up in the North Sea over the past 40 years.





He said: “The people operating in the North Sea are some of the best technicians you’ll find anywhere.The danger is these people will now go to where they are better remunerated – that is why the UK Government should not mess around with the tax issue.”