(MENAFN- ProactiveInvestors - UK) An oil industry veteran has insisted the North Sea oil industry still has a bright future despite a downbeat outlook report from the industry.
Sir Ian Wood the former chief executive of Wood Group which reported upbeat annual results on Tuesday said the industry should recover within the next five years.
Wood said nearly a third of the region's oil reserves had still to be extracted and said oil prices could return to between US$55 and US$60 a barrel.
He said the current crisis sparked by oil at U$30 a barrel was "probably as tough as it gets" but urged the industry not to be excessively negative.
"It could be 15 to 16 billion barrels to come so there's a huge prize out there and it's quite wrong to think that the North Sea is finished" he told BBC Radio Scotland.
His former company which like rivals has been battling the impact on its business of lower oil prices reported pre-tax earnings before interest and amortisation of about US$470mln matching expectations.
It also saved US$148mln and reduced staff numbers by more than 8000 people or a fifth of its workforce.
The group increased its Total dividend by 10.2% to 30.3 cents.
Chief executive Robin Watson said: "Our continued actions to reduce costs improve efficiency and broaden our service through organic initiatives and strategic acquisitions position us as a strong and balanced business in both the current environment and for when market conditions recover.'
Wood's shares rose 25.5p or 4.4% to 609p as investors battered by a torrent of bad news from the industry welcomed the announcement.
There was no respite from the gloom however as a study from industry lobby group Oil & Gas UK said exploration remained at an all-time low with no sign of improvement.
The industry managed to cut costs in North Sea operations by 40% with unit operating costs down by a third to US$20.95 a barrel in 2015 from an average of US$29.3 in 2014 the association said.
Costs are set to fall by a further 20% this year to about US$17 a barrel representing a 42% improvement in two years.
But a 70% fall in the oil price since summer 2014 and a 20% dip in the average daily gas price last year has triggered a sharp decline in investment in new projects.
This year the upstream industry is expected to approve less than 1bn to spend on new projects compared to a typical 8bn per year in the last five years.
Whilst success per exploration well drilled in 2015 was the highest for a decade the rate of exploration for new oil and gas reserves stayed at an all-time low.
Just 13 exploration and 13 appraisal wells were drilled in 2015 and as companies restrict capital even further seven to 10 exploration wells and six to nine appraisal wells are forecast to be drilled this year.
Total capital spending fell from 14.8bn in 2014 to 11.6bn last year and is expected to decline further this year to around 9bn.
The supply chain contracted by one quarter in the last year and is expected to shrink again in the coming year as current projects near completion according to Rystad Energy.
In the last year the number of fields expected to cease production between 2015 and 2020 has risen by a fifth to over 100.
Reserves reported by companies for potential future development have fallen from 10bn to 8.8bn boe as projects are deemed uncommercial at current oil prices.
Despite the rise in production to an average of 1.64mln barrels of oil equivalent per day in 2015 revenues fell 30% to 18.1bn.
Oil & Gas UK said 43% of all UK continental shelf (UKCS) oil fields are likely to run at a loss if the oil price stays around US$30 a barrel for the rest of this year.
The lobby group urged the government to cut taxes on the industry to kick-start investment in new projects including getting rid of special levies on all finds in the next five years.
Chief executive Deirdre Michie said: "The UKCS is entering a phase of 'super maturity'.
"While the industry's decades of experience provide great depths of knowledge and expertise which can be applied to recover the still significant remaining resource the report highlights the challenges that the falling oil price poses in our capability to maximise economic recovery of the UK's offshore oil and gas."
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