A survey by Oil & Gas UK has revealed that spending on new offshore oil projects is expected to fall below £1bn in 2016, compared with the typical £8bn per annum in the last five years.

The 2016 Activity Survey focuses on the activities of exploration and production companies operating in the UK Continental Shelf (UKCS).

Oil & Gas UK is urging the government for urgent reforms of special taxes paid by the industry in a bid to attract investment back to the basin.

According to the report, sector-wide action has pushed down unit operating costs by a third from an average of $29.30/barrel of oil equivalent (boe) in 2014 to $20.95/boe in 2015.

"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."

Costs are also expected to fall by a further 20% in 2016 to around $17/boe.

Oil & Gas UK 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."

The oil price since mid-2014 has fallen by 70% and the average daily gas price dropped by 20% in 2015.

Revenues also witnessed a fall by 30% to £18.1bn, despite an increase in production to an average of 1.64 million boe per day in 2015.

If the oil price remains at around $30 for the rest of 2016, nearly 43% of all UKCS oil fields are expected to operate at a loss.

Total capital expenditure in 2014 fell from £14.8bn to £11.6bn in 2015 and is further expected to fall to around £9bn in 2016.

Michie added: "A coherent approach by the industry, regulator and government will be critical to boost the industry’s competitiveness and its investors’ confidence."