A drop in North Sea oil and gas production could be to blame for the UK entering a 'double-dip' recession.

The Scotsman newspaper reported today that the industry, off the coast of Scotland, was hit by its biggest ever fall in production and said the slide affected industrial output.

Oil and gas production fell to 656m barrels of oil equivalent in 2011, 19% of the amount produced the year before.

Offshore industry body Oil & Gas UK said the operating cost per barrel rose by a quarter from 2010 to $17 per boe. This is down to ageing infrastructure and platform shutdowns for safety and maintenance reasons. It said the number of exploration wells drilled in 2011 halved compared with 2010 although many of those that did go ahead were successful, together adding 200 to 300 million boe to reserves.


Mike Tholen, the economics director of Oil & Gas UK, admitted that 2011 had been an "exceptionally bad" year for production but he stressed that the industry body was already engaged closely with government officials to identify ways of increasing exploration activity and to ultimately bring new reserves on stream.

Production levels are expected to slide further this year but pick up by 2013.

Mr Tholen was optimistic about the industry's long-term future.

He said: "There is something like £1 trillion worth of opportunities in the North Sea still to be developed and brought into production. It's a massive prize and it will take decades to deliver."

(NE/GK)