IT has been central to the Scottish economy for over forty years and played a prominent role in the independence referendum.

North sea oil, the discovery of which fuelled support for the SNP in the 1970s, was second only to currency in terms of economic flashpoints in the 2014 plebiscite.

According to the SNP wing of the Yes campaign, the proceeds of the Scottish part of the UK Continental Shelf (UKCS) would have been diverted into a special “energy fund” after independence.

It was argued that the revenues would be a “bonus” for future generations and the country’s economy would not depend on the taxes generated.

A special section of the Scottish Government’s independence white paper was even devoted to black gold, which had done so much to benefit the UK’s 60 million-plus inhabitants.

Two projections for 2016/17, which was to be the first year of independence, were offered. Under model one, Scottish oil and gas receipts were forecast to generate £6.8bn in tax revenues. The second model, based on higher production, pumped out a figure of £7.9bn.

Months after the referendum, the collapse of the oil price from around $110 a barrel to less than $50 blew a hole not only in the White Paper but also in the Scottish economy.

The Government Expenditure and Revenue Scotland figures - known as GERS figures - laid bare the crisis. As a result of the collapsing oil price, Scotland’s deficit in 2015/16 - after taking its share of north sea revenues into account - increased to nearly £15bn. At the same time, Scotland’s share of the sea bed bounty fell from £1.8bn in 2014/15 to £60m - a fall of nearly 97%.

To put the dramatic fall into perspective, the North Sea generated nearly £13bn of revenues for the UK in 2008, almost £11bn three years later, and a perky £5bn in the year before the referendum.

In a further blow, the Office for Budget Responsibility last week downgraded its oil and gas receipt forecasts by 37%. The Treasury now expects to receive £4.6bn between 2017 and 2022, down from £7.3bn.

So what does the future hold for an industry that is believed to be responsible for the direct and indirect employment of around 330,000 jobs in the UK and nearly 124,500 in Scotland?

The Scottish Government’s last oil and gas bulletin from June 2015 - a revised version has been mysteriously delayed - confirmed the opportunities and challenges in the troubled sector.

On the plus side, the UKCS remains the largest oil producer in the EU and the report repeated the industry forecast of increased production between 2014 and 2019.

The Bulletin also estimated that there are around 23 billion recoverable barrels of oil.

However, the Government document also spelled out the industry’s long term problem of high costs.

Although there was continued investment in the North Sea, much of it was in “complex field developments”. The spend on maintaining and upgrading “ageing infrastructure” also continued to rise.

The Bulletin also revealed that operating expenditure - jargon for staff, salaries, contractor fees and equipment costs - had more than quadrupled between 2003 and 2014.

It concluded: “The combination of rising capital investment and operating costs has resulted in total UKCS expenditure reaching record levels for four successive years. As a result, the industry is estimated to have generated a negative cash flow in both 2013 and 2014.”

The 2015 Bulletin included various revenue forecasts: the lowest projection, based on an oil barrel price of $70, came in at £2.4bn over four years; at the higher end, a $100 figure produced revenues of £10.8bn over the same four-year period. By contrast, the 2014 White Paper flagged up the possibility of £7.9bn in revenues in one year alone.

Nearly two years on from the publication of the Bulletin, around 120,000 jobs in the sector and wider supply chain are believed to have been lost due to an uncompromising round of cuts.

According to a report last week by Oil & Gas UK - the representative body of the offshore industry - the cost-cutting drive has had a “significant impact” on competitiveness. In addition, 34 new fields have been brought into production since 2013 and up to 18 more could come on stream this year.

Russell Borthwick, the chief executive of the Aberdeen & Grampian Chamber of Commerce, said he believed the industry may have turned a corner after the cost-cutting: “There has been a significant re-adjustment, but we do think that that re-adjustment has been pretty much fully made now.”

Borthwick said the Aberdeen Region City Deal, which could potentially unlock £826m of public and private sector investment, is also a huge help.

He said the new Oil and Gas Technology Centre, which is supported by the City Deal, will maximise attempts at accessing the 20 billion-plus barrels of oil left in the North Sea.

The OGTC will also set up a number of “solution centres” and help companies with decommissioning, well construction and the exploitation of smaller pools.

Borthwick said of the UKCS: “News of its demise is probably a little bit ahead of time.”

A paper co-written by Aberdeen University’s Professor Alex Kemp and Linda Stephen, also finds cause for a degree of optimism.

They argued that an increase in exploration could have a “significant effect” on activity and economic recovery for the UKCS.

The paper also included forecasts based on oil barrel prices of $50 and $60. Speaking to the Sunday Herald, Professor Kemp said: “At $50 not all that many new projects are viable. At $60 a fair number are, but that is made possible by the cost reduction.”

However, he cautioned that, even at a $60 price, a “large number” of small fields will remain undeveloped. He also said exploration was at a “very low level”, adding: “If you don’t drill wells, you won’t make discoveries.”

Asked whether he believed the UKCS tax revenues could get back to White Paper levels, he said: “No.”

He explained: “Unless there is a dramatic increase in the price, the tax revenues will be quite modest.”

The industry bind is obvious: there is little incentive to make new discoveries if the search is uneconomic and the prospect of large profits is low.

Jake Molloy, regional organiser with the Rail, Maritime and Transport union, has a more brutal perspective.

On the tens of thousands of jobs lost, he said: “It’s been absolutely devastating. There seems to be no end to it.”

He said oil workers were being shunted onto “sham self employment” and said of his members: “They have lost quite significant benefits in the form of leave entitlement and sickness entitlement.”

He is also worried about offshore safety on account of the staff being reluctant to “report”, “challenge” or “question” anything.

He said: “People are looking over their shoulder at the ever-present threat of redundancy or more cuts to their terms and conditions. When you aren’t focused in a major hazard industry, you worry about what the guys might do.”

He said working in the North Sea was becoming comparable to being employed in the Gulf of Mexico, where he said staff have no protections or employment rights: “There is nothing positive to say at about the situation for offshore workers.”

However, attempts are being made to ensure that the Scottish economy, and the North East in particular, is no longer dependent on oil and gas.

According to Borthwick, progress has been made in diversifying the regional economy: “There are a lot of technologies that have been developed here and a lot of project skills which exist in this region that could be equally applicable to new energy sources.”

He views the future of the North East economy as being in four areas: energy; the “well kept secret” of life sciences; the “hidden gem” of tourism; and the food, drink and agriculture industries.

However, Molloy is downbeat and disputes talk of a rebirth: “I’m sitting here looking out of the window and there’s a couple of hotels across the road. Their car parks are empty.”

Although there are signs that Aberdeen is slowly moving towards a post-oil reality, the same cannot be said for Scotland’s constitutional debate.

Andrew Wilson, the former MSP tasked with chairing the SNP’s growth commission, said last week that oil had been a “basis” of the White Paper’s post-independence finances, rather than just being considered a bonus.

His candid admission and the latest figures on UKCS revenues dominated Scottish politics last week and again put oil at the centre of the independence debate.

As a senior SNP figure told this newspaper: “It’s ironic that the issue which put us on the map is now one of the biggest barriers to independence.”