LONDON (Reuters) - British oil and gas production could halve by 2025 if oil companies do not spend enough to squeeze every last drop out the North Sea, industry group Oil and Gas UK warned on Tuesday.

A drilling rig is parked up in the Cromarty Firth near Nigg, Scotland,Britain January 27, 2015. REUTERS/Russell Cheyne

Oil and gas companies, including former North Sea heavyweights BP, Shell and Statoil, have slashed their budgets by billions of dollars as they grapple with a 70 percent fall in oil prices.

Britain, one of the oldest oil and gas basins, has been hit especially hard as low revenue prospects are coupled with some of the world’s highest exploration and production costs.

New investments in the UK Continental Shelf, Britain’s offshore oil and gas production area, are expected to sink to less than 1 billion pounds this year, compared with an annual average of 8 billion pounds over the past years.

“The outlook where we’re seeing little fresh investment coming is the scary bit in all of it,” Mike Tholen, Oil and Gas UK’s economic director and author of its annual report, told Reuters.

“We’re a very simple industry: if you don’t keep investing, you’re not likely to see a good future in the North Sea.”

The British government last year cut oil and gas taxes to prevent companies from leaving the North Sea and established a dedicated oil regulator to help them maximise output.

Oil and Gas UK said more tax relief is needed in next month’s annual budget to ensure companies continue investing, echoing demands from the Scottish government, whose economy is heavily oil and gas dependent.

The oil price fall has accelerated the permanent shutdown of some fields, with 21 ceasing production in 2015, and Oil and Gas UK said as many as 80 could follow by the end of 2020.

Almost half of Britain’s oil and gas fields will be loss-making this year if oil prices remain at current levels around $30 a barrel, the lobby group said.

“Were a number of these fields to cease production, their interconnectivity would mean many more could become sub-commercial, known as the ‘domino effect’,” the report said.

As oil prices are expected to remain weak, the group expects more job losses in the sector this year after a fall of around in employment in 2015.