NORTH Sea oil and gas firms remain positive about their prospects although they are uneasy about rising costs and low levels of exploration, research shows.

In the latest quarterly Business Sentiment Index research by Oil & Gas UK a positive balance of 6 per cent of firms said they were more optimistic than they had been in the previous period.

The index measures a range of economic indicators, including business confidence, activity levels, revenue, investment and employment with a reading above zero indicating a more positive outlook.

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However after four successive falls, the latest index reading was still well down on the level of 22 reached in the first quarter of last year.

The index score was the lowest since the second quarter of 2011, when it stood at 5.

Oonagh Werngren, Oil & Gas UK's operations ­ director, said: "Whilst the mood of the industry remains positive, those in the sector recognise there are underlying problems that need addressing - namely, rising operating costs and a current decline in exploration."

Ms Werngren welcomed the fact there was a strong response to the latest UK licensing round

The UK Department of Energy and Climate Change said recently it had received 173 applications under the 28th round, covering around 370 blocks or part blocks.

The number of applications was the fifth highest since the first auction in 1964.

The number of blocks applied for was the third highest on record.

But, following a fall in exploration activity last year, Mr Werngren said the focus must be on drilling more wells.