The UK offshore oil and gas industry has been badly hit by rising costs, taxes and "inadequate regulation", according to a new report published today.
Urgent action is needed in the face of "striking evidence" which shows that 2014 was the worst year for the industry since the 1970s.
The report by industry body Oil & Gas UK said that it was vital to secure new investment and address the "collapse" in exploration if the UK is to make the most of its significant untapped resources and increase its international competitiveness. Its 2015 activity survey of exploration and production companies operating on the UK Continental Shelf (UKCS) found that revenues declined to just over £24 billion, the lowest since 1998.
That, combined with rising costs, resulted in a negative cash flow of £5.3 billion - the worst in four decades.
Oil & Gas UK's chief executive Malcolm Webb said: "This year's activity survey paints a bleak picture but also identifies this region's potential, emphasising the importance of government and industry now putting the right measures in place to secure its long-term future.
"This is crucial, not only for the energy security that domestic oil and gas production provides, but also for the hundreds of thousands of highly skilled jobs, advanced technology and billions of pounds of exports which the industry underpins.
"Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground."
Headline figures from the survey show that operating expenditure in the UKCS rose by almost 8 per cent to £9.6 billion in 2014, while unit operating costs jumped to £18.50 per barrel of oil equivalent, up from £17 in 2013.
Cost over-runs and other factors pushed capital investment last year beyond expectations to £14.8 billion, with half spent on just 12 fields, the report revealed.
Investment in new projects over the next three years was last year forecast at £8.5 billion but this year's survey estimates it at around £3.5 billion.
Exploration for oil and gas in the UK last year was also said to be significantly worse than anticipated with only 14 wells drilled out of the expected 25.
However, production in 2014 had its best performance since 2000, falling just 1 per cent since 2013 to 1.42 million barrels of oil equivalent per day.
But oil prices averaged 99 dollars per barrel in 2014, with the average price in the last quarter significantly lower at 76 dollars.
Mr Webb added: "Even at 110 dollars per barrel, the ability of the industry to realise the full potential of the UK's oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation. At current oil prices, we now see the consequences only too clearly.
"The industry recognises that its cost base is unsustainable. Cost and efficiency improvements of up to 40 per cent are required to give this basin a viable future.This adjustment is now under way, but cost control alone is not the answer.
"The basin needs sustained, high investment - £94 billion alone to recover the 10 billion boe in known reserves. This is why a concerted effort on three fronts is needed - tax, regulation and cost - to make the basin more attractive to investors and ensure that significant sums of much-needed capital come to the UK."
Chancellor George Osborne vowed to take further action to support the North Sea oil and gas industry.
He said: "While the huge fall in the oil price has been a real benefit to the British economy, it's been a challenge for the North Sea oil and gas industry.
"We've got record investment in the North Sea and there's a lot of oil still in there. We want to continue to maximise investment in the North Sea to make sure it continues to provide jobs and economic benefits to the whole of the UK. The North Sea is a great national asset and we will do everything to protect it.
"I've already cut taxes in the North Sea and we're now looking at what more we can do to work with industry to support investment in this important sector."
Mr Osborne will be meeting Mr Webb and other industry leaders tomorrow to discuss what action is needed by both industry and government to ensure the long term success of the sector.
Additional reporting by Press Association