Sir Ian Wood speaks on oil crisis

Fears that the UK oil industry is close to collapse are "over the top'' but the sector is facing a "very difficult year'', a leading expert has warned.

Sir Ian Wood, founder of the Wood Group and a UK Cabinet adviser, said the industry has "significant momentum from major investments made over the last two or three years''.

He dismissed claims by Robin Allan, chairman of the independent explorers' association Brindex, that the industry is "close to collapse''.

Forecasters Oxford Economics said oil prices are likely to be lower over the longer-term than forecast three months ago'' due to weak demand from China and strong production from the US.

But it expects oil prices to rise to $111 US dollars a barrel by 2020 and $200 a barrel by 2040.

Sir Ian said: "Comments yesterday that the UK offshore oil & gas industry was 'close to collapse' are over the top for an industry which thinks and plans long-term, has significant momentum from current production and from major investments made over the last two or three years, and where the operators make their investment decisions based on the anticipated price of oil in two to three years' time.

"It's important to have a balanced perspective at this time.

"The UKCS (UK Continental Shelf) does face a very difficult year to 18 months which will see a slowdown in investment, the loss of some offshore production, up to 10%, and the possible loss of around 15,000 jobs within an industry which employs 375,000, although this is difficult to estimate.

"It will be a tough time for the industry and the people that work in it, but we are entering a downturn from which we will recover.''

Chief Secretary to the Treasury Danny Alexander described the recent slump below $60 a barrel as "a big concern'' but insisted the North Sea is "open for business'' and backed by government support for decommissioning, investment and exploration.

Mr Alexander said: "We have to accept that there is going to be significantly less tax from North Sea oil and gas because that is necessary to get the investment, to continue to create the jobs and support what is one of the most important employers, not just in Scotland but across the whole of the UK.

"It is very important to send a message to investors around the world that the North Sea is open for business.''

Scottish First Minister Nicola Sturgeon called on the UK Government to provide more tax incentives.

She said: We need more from the UK Government around tax incentives, we need more detail about the implementation of the proposed new investment allowance, we need to be supporting exploration.

"The Scottish Government will continue to do what we can around skills andinnovation, but we need serious and very definite measures from the UK Government to help.''

Offshore union RMT has called for a "crisis management'' plan to rescue British jobs and infrastructure.

It has major concerns'' about the impact of cost-cutting across the sector, with workers from Total, Apache, Shell and others complaining that terms and conditions are to be cut and shift patterns altered.

Major redevelopment and refurbishment projects will be delayed indefinitely as investment dries up'', the Health & Safety Executivewill be stretched to maximum capacity trying to deal with the introduction of the new EU Offshore Safety Directive'', the sustainability of production is at risk'', and the UK taxpayer faces a bill of up to £30 billion for decommissioning, it said.

RMT general secretary Mick Cash said: If immediate action isn't taken then we risk turning today's crisis into longer-term damage that would threaten the very core of our offshore industry.

With tens of thousands of jobs at stake, along with the prospect of lasting damage to infrastructure, production capacity and the safety culture, intervention is absolutely critical.''

• Joe Odber