THE North Sea oil and gas industry is heavily reliant on thousands of skilled workers from European Union countries a report has found, prompting calls for the Government to ensure the free flow of labour after Brexit.

The report also found the £600 million costs associated with oil and gas related business between the UK and European Union members could increase by £500m annually or fall by £100m after Brexit depending on the outcome of trade talks.

It was commissioned by Oil & Gas UK to help understand the possible impact that exiting the EU could have on the industry .

Chief executive Deirdre Michie said Oil & Gas UK was an apolitical body that could not take a position on Brexit.

However, she has told Theresa May the Government should prioritise maintaining frictionless access to markets and labour in the Brexit negotiations to help protect an industry that has been devastated by the crude price plunge since 2014.

In a letter sent to the Prime Minister on Monday, Ms Michie wrote: “As you are aware, this industry has been going through a prolonged global downturn, the impact of which is significant in terms of reduced investment levels and jobs lost from throughout the supply chain.”

She added: “We are becoming a more globally competitive industry, but we continue to be very sensitive to any additional burdens either in relation to cost, or restrictions on the movement of key personnel required for critical operations.”

Ms Michie told the prime minister that Oil & Gas UK believes EU workers fill many highly skilled roles that are often critical for oil and gas projects.

“Therefore we urge Government to consider these roles when developing post Brexit immigration policy,” she wrote.

The report notes that research by EY for Oil & Gas UK in March found that around five per cent of the workers in the oil and gas supply chain come from EU countries other than the UK.

With 156,000 people reckoned to be working in the supply chain, EU countries provide around 7,800 workers. The bulk of these work in skilled positions.

The Oil & Gas UK report notes: “Around 70 per cent of the roles these EU workers fulfil are skilled, with one in two workers holding a managerial or professional role.”

It found the worst outcome of the Brexit negotiations would be for the £73bn oil and gas related trade between the UK and EU to be conducted on the terms set by the World Trade Organisation.

Tariffs would not be charged on the trade in crude oil and natural gas. But levies on products derived from oil and gas such as petrochemicals would add £260 million to the cost of exports from the UK, potentially hitting demand for them. The cost of imports would increase by £230m.

“Those companies which frequently trade in highly manufactured good, plastics or chemicals are the most likely to be adversely affected, “ the report states.

It adds: “If the UK seizes opportunities to negotiate minimal tariffs with the EU and improved tariffs with the rest of the world, we estimate that the current cost of trade could fall by around £100 million per annum, to a total of £500 million.”

Ms Michie said other priorities in the Brexit talks should include protecting energy trading and the internal market and ensuring a strong voice for the UK in Europe.

She told the Prime Minister: “Our request of Government is that any change, whether domestic or European, is managed in a manner that minimises risk to the oil and gas industry and provides predictability and clarity wherever possible, through constructive dialogue and consultation.”