The investment plans of 29 oil and gas production companies operating in the North Sea were analysed by the UKOOA which found that expenditure in new offshore developments will remain around £3.5bn a year over the next few years while production costs are set to rise by about 60%.

According to the report, mounting unit costs and declining production volumes mean that UK offshore oil and gas producers have a two to three year window of opportunity to contain the rate of decline in the North Sea.

Adding to the problem is that despite the government awarding 10 new development contracts in 2003 the amount of oil and gas extracted from the region will continue to fall in 2004.

Volume predictions for 2004 are just over 3.7 million barrels of oil equivalent per day (boepd), down by 280,000 boepd compared with last year's outlook.

According to the UKOOA oil & gas companies need to work harder to bring marginal fields into production and invest more into exploration or the economy of England's east could suffer with around 15,000 jobs going on the line.

The association is also calling on the Government to help the industry make the most of the assets in the North Sea.

"Ultimately, the sector's long term success will depend on the ability of the Industry to arrest the current trend that is seeing it spending more to produce less. This will take the combined efforts of industry, the supply chain and government to find new ways to enhance the region's commercial attractiveness through cost reductions, technology breakthroughs, fiscal incentives and containing the increasing regulatory burden," said Alan Booth, UKOOA president and senior vice president and managing director of Encana (UK).