UK government orders "urgent" review of North Sea oil and gas production as prices continue to fall

Andy Samuel will become chief executive of the new Oil and Gas Authority when it is established in April, following last year's government-commissioned review of the industry by expert Sir Ian Wood. Ahead of this, he will now work with industry to identify "practical" measures that could be taken to offset the recent "very dramatic falls" in global oil prices, according to the latest announcement.

"The oil and gas industry is used to volatile prices in world markets and will get through the latest downturn as it has in the past," said Ed Davey, the energy secretary. "However, given the huge value of the UKCS to the nation and the relatively high cost base that it has, I am concerned to make sure that it does so in the best possible shape for the future and well placed to deliver our goal of maximising economic recovery as set out by Sir Ian Wood."

Samuel has been asked to present his early findings to the government by the end of next month, Davey said.

The announcement came as oil company BP announced that it planned to cut 200 jobs and 100 contractor roles following a review of its activities in the North Sea, announced at the end of last year. The company said that it expected a "relatively small number" of compulsory redundancies as part of the restructuring, which was a result of "the well-documented challenges of operating in this maturing region and in toughening market conditions".

The price of a barrel of oil fell to around $46 earlier this week, and currently stands at a little over $48. This time last year, a barrel of oil cost over $100. A number of major energy companies have already announced that they are to cancel planned projects as a result of economic conditions in the sector; including Shell, which has pulled out of a "commercially unfeasible" planned petrochemicals project in Qatar. In a market update on Wednesday, Premier Oil said that it had responded to the falling oil price with "a broad programme of cost reductions and the postponement of discretionary spend".

Industry body Oil and Gas UK, backed by the Scottish government, is calling for major changes to the way that the industry is taxed as part of the UK government's budget in March. In particular, they have asked that the chancellor abolish the 30% supplementary charge on corporation tax, which was introduced and then increased in response to rising oil prices. According to Oil and Gas UK chief executive Malcolm Webb, oil and gas producers would still be paying tax at a 50% higher rate than the rest of UK businesses on their profits.

Energy expert Bob Ruddiman of Pinsent Masons, the law firm behind Out-Law.com, said that the oil and gas industry should be amongst George Osborne's priorities in the 2015 Budget.

"Successive governments have failed to understand the requirement for a mature, long-term energy policy, instead taking a short-term view involving regular tinkering with tax rates," he said. "I would hope that has now come to an end and Mr Osborne will take a more progressive approach in 2015 to show support for what is one of the country's most important industries."

"While the oil price is a concern, let's not forget the global demand for oil and gas remains high and we still have significant hydrocarbon resources in the UK, backed up by a world-class supply chain. You don't need a crystal ball to predict the UK will continue to be a significant producer of oil and gas for the foreseeable future, provided all stakeholders work together towards that common goal," he said.