THE chief executive of BP, Bob Dudley, has said the oil and gas industry downturn is as bad as the slump of 1986 and warned the crude price could fall further.

Mr Dudley said oil prices could come under renewed pressure in coming months with Iran set to export huge volumes of oil following the lifting of sanctions on the country.

“The first and second quarter will be very difficult... It is a big shock for producing countries. It reminds me of 1986,” Mr Dudley told reporters at the World Economic Forum in Davos.

Brent crude fell to a record low of below $10 per barrel in 1986. This followed a period of high prices which encouraged firms to invest in growing production only to slash spending in areas such as the North Sea when the market turned.

The current downturn has followed a similar pattern.

Companies have shelved projects and laid off thousands of workers in response to the fall in the Brent crude price, from $115/bbl in June 2014 to around $28/bbl yesterday.

Last week BP announced plans to shed a further 600 jobs in the North Sea, where it cut 300 posts in January last year.

Mr Dudley emphasised that he expected oil prices to remain low for a long time.

However, he held out hope that prices may start to increase later this year.

“Prices will remain low for longer but not forever,” he said. The market may rebalance as cuts in investment result in production falling.

In a report on the implications of the oil price fall PwC advised firms yesterday: “No matter how tempting or pressured it gets, avoid arbitrary cost cutting.”

The accountancy giant said oil and gas executives would have to help their firms navigate one of the most volatile periods in the industry's history. They will have to consider how to respond to the issues of over-supply and increasing competition in the market during a period when there is increasing pressure to reduce carbon emissions.

Andrew Clark, a partner in PwC's energy practice, said:

“As we enter a second year of low oil prices, every industry operator will be challenged, albeit in different ways.

“It’s vital that our oil and gas chief executive officers rise to the occasion, identifying robust strategies that will enable them to reposition their firms and capitalise on their current market-leading strengths as well as future opportunities."