Investment in North Sea oil and gas will fall away sharply unless urgent action is taken to address serious underlying problems in the sector, a Government-commissioned review has found.

Former oil industry boss Sir Ian Wood warned there could be a 50% cut in investment over the second half of the decade, unless further new commercial fields were discovered.

While he estimated that a further 12 to 24 billion barrels of oil could still be extracted from the North Sea over the coming decades, he said the existing regulatory framework needed to be overhauled in order to maximise the economic benefit.

He reaffirmed his recommendation in his interim report last November for the creation of a new arm's length body with a remit to maximise collaboration in exploration, development and production across the industry.

Sir Ian said that it should be possible to deliver at least three to four billion more barrels over the next 20 years, worth around £200 billion to the UK economy.

Energy and Climate Change Secretary Ed Davey, who commissioned the review, said he fully accepted the findings and would begin implementing its recommendations immediately.

Scottish Finance Secretary John Swinney backed the call for a new industry regulator, and said Aberdeen was "the only conceivable location" for such a body to be based."