THE NORTH Sea industry has a future but a number of fundamental issues will need to be addressed in the next two years if the basin is to avoid a rapid and premature decline.

That is the finding of A Sea Change, a PwC report that interviewed 37 senior executives from industry, academia and government.

While much progress has been made in tackling issues such as cost efficiency and implementing recommendations from the 2014 Wood Review, the report warned that any inertia at this pivotal moment could lead to decline at an exponential rate. It is already too late for a fifth of respondents, who said they believed the North Sea industry was in terminal decline.

On the whole, the report found that the North Sea remained an “exciting prospect” with up to 30 billion barrels of oil equivalent undiscovered, but the window of opportunity to effect change was getting smaller.

The report also claims that the industry is lacking leadership and new ideas are urgently required to ensure cost efficiency is embedded irrespective of the vagaries of the oil price.

Innovation has been stifled by large operators moving talent to frontier basins, and the growth of independents, while bringing new expertise and investment, has also fostered fragmentation across the basin. Respondents recognised that a change at the top is essential if the industry is to successfully change its “we’ve always done it this way” mentality and become a force for innovation while demonstrating entrepreneurial and forward-thinking leadership.

A ‘super joint venture vehicle’ will be key to consolidating smaller and fragmented assets under one operator, the report found. Such an investment vehicle could drive greater cost-efficiencies, boost bargaining power with suppliers, and enable a more co-ordinated approach to decommissioning of the asset pool.

PwC said a robust roadmap is needed to transform the basin, meet short term energy needs and bridge the gap to a lower carbon future.

Alison Baker, PwC’s UK and EMEA oil and gas leader, said: “During our interviews we picked up a real sense of urgency to create one last cycle of success that will retain and generate jobs, stimulate growth and ensure security of energy supply. But this was matched by a level of frustration at the fundamental issues that need tackling to avert the risk of rapid and premature decline.

“Part of the solution is for government agendas across treasury, Department of Energy & Climate Change and the Oil and Gas Authority to be much better aligned to the needs of the whole industry, from super majors to smaller oil field services firms.

Ms Baker added that the majority of respondents want the UK government to take a lesson from Norway and Saudi Arabia and “be bold in setting out their blueprint for the future”.

She said: “This must incorporate onshore activity as well as defining how the North Sea basin will evolve in the short to medium term and, crucially, how the end game - and subsequent transition to a low carbon landscape - will be managed.”

The report also said the Government should consider setting up a decommissioning fund or a guarantee scheme which helps smaller companies cover their letter of credit requirements for decommissioning.