MANY of the small and medium sized enterprises that help oil and gas companies run their North Sea operations will face a struggle for survival this year as the crude price plunge takes a heavy toll on the area EY has warned.

Experts at the accountancy giant said the slump triggered after the oil price started tumbling in 2014 was more severe than past downturns and will hit SMEs particularly hard.

“The majority of small and mid-sized UK oilfield services companies are experiencing significantly greater declines than the top 100 global OFS companies and 2016 is about survival for many,” said Barry Fraser, a director at EY.

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The warning has alarming implications for jobs in Scotland. Oil and gas firms shed around 5,500 North Sea jobs in the first six months of last year alone as the effect of the oil price fall rippled through the supply chain. This left oilfield services firms fighting for shares of a shrinking pie.

Mr Fraser’s comments draw attention to the fact many oil services SMEs do much of their business in the North Sea, a high cost area which has been hit harder than some by the downturn.

Big firms are likely to have more diverse operations and greater financial reserves to draw on amid the downturn. They could use these to buy up rivals to help them build scale and expand their reach.

Mr Fraser said: “Consolidation in this environment will be inevitable.” He noted EY has estimated up to one third of the 1500 UK registered OFS companies may disappear from the market.

It reckons the total revenues of the top 100 global oil services companies fell around 20 per cent in 2015, after years of growth, with a further decline of five per cent likely this year.

Separately, the Lime Rock Partners private equity firm has provided £50 million backing for Aberdeen-based Ardyne, which has bought Norway’s Wellbore AS. Ardyne expects to capitalise on oil and gas firms’ efforts to cut costs and on a rise in decommissioning activity as some fields are taken out of production.