An Aberdeen-based oil exploration company has gone into administration, marking the first significant failure of a UK oil company as a result of the global economic crisis.

An Aberdeen-based oil exploration company has gone into administration, marking the first significant failure of a UK oil company as a result of the global economic crisis.

Oilexco North Sea, which employs about 50 people, was the most active driller of appraisal wells in the North Sea in recent years, outdoing the likes of BP and Royal Dutch Shell.

Although it has been looming since October, the failure to secure the funding Oilexco needed will send shockwaves through the North Sea industry.

Reacting to the collapse, Professor Alex Kemp, Schlumberger Professor of Petroleum Economics at the University of Aberdeen, said the North Sea was facing problems on two fronts, the oil price fall and the global credit crunch.

"The dramatic fall in the price of oil over the last few months is causing difficulties in the North Sea, and I would expect that even without the credit crunch investment at $40 or $50 in the North Sea next year, or however long $40 lasts, will be down a bit compared to last year," he said.

"We have a lot of fields and they are on average relatively small, so the cost per barrel is relatively high and we need a price of at least $60 to get a good level of activity.

"On top of that we have the credit crunch' as everyone calls it. What that means is that for small and medium (sized) companies which rely on external funds or debts from banks and equity, or a combination, the availability of this capital has become more difficult in recent months.

"This has caused a problem for small and medium oil companies in the North Sea which require external funds," Kemp added.

"The issue is there and unfortunately some are also active explorers and developers of small fields and I would think there is quite a reasonable chance that some of the companies having financing difficulties could be taken over or perhaps have their assets taken over."

A spokeswoman for Oil & Gas UK, the industry body, said the oil industry was not immune to the credit crunch and lower oil price.

"Obviously some companies will be able to subsidise their investment with cash flow when they have producing assets but it will prove more of a problem for companies which don't have producing assets."