The plea from Oil and Gas UK came as Aberdeen-based First Oil Expro announced it had entered administration.
The Oil and Gas UK 2016 activity survey found the rate of exploration for new reserves on the UK Continental Shelf (UKCS) is at an all-time low “with no sign of improving”.
Writing in the foreword to the report, Oil and Gas UK chief executive Deirdre Michie said: “We are an industry at the edge of a chasm.”
A “significant permanent reduction” in tax rates is required across the UKCS to attract investment back into the basin as it enters a phase of “super maturity”, she said.
The report found that while production rose by 9.7 per cent in 2015 to 1.64 million barrels of oil equivalent per day, revenues fell by 30 per cent between 2014/15 to £18.1billion due to the crash in the price.
Despite industry action expected to reduce operating costs by 42 per cent between 2014 and 2016, nearly half (43 per cent) of UKCS oil fields are likely to operate at a loss this year at the prevailing $30 (£21) oil price.
Less than £1billion of fresh capital is expected to be approved in 2016, compared to a typical £8billion per year in the last five years.
Ms Michie said: “Together, we need to transform the basin into a highly competitive, low-tax, high-activity province, which is attractive to a variety of operators and sustains and supports the important supply chain based here. The industry currently pays special taxes at a headline rate of 50 per cent – 67.5 per cent for fields paying petroleum revenue tax.
“A significant permanent reduction in those rates is now urgently needed, a move which would be consistent with HM Treasury’s ‘Driving Investment’ plan for fiscal reform.
“This should be combined with measures to help unlock the late-life asset market and encourage exploration by permanently removing the special taxes from all discoveries made over the next five years.” First Oil began reviewing its operations last year as the oil price fell and started the process of selling parts of the business.
As a result of yesterday’s announcement, Enquest and Cairn Energy will take on the company’s 15 per cent stake in the Kraken North Sea Oil field.
Enquest will now have a 70.5 per cent interest in the vast field, and Cairn a 29.5 per cent interest.
Zennor Petroleum is expected to take on First Oil’s interests in the Mungo and Monan, Bacchus, Cormorant East and Causeway fields.
Blair Nimmo, joint administrator and head of restructuring at KPMG in Scotland, said the sales, via the administration process, were a reflection of the “significant challenges facing UK North Sea oil and gas companies in the current oil price environment”.
He said: “These sales will ensure that the group’s four largest field interests are smoothly transferred to new ownership, and provide time to resolve the position concerning the smaller assets in the group’s portfolio.”