THE North Sea oil and gas industry is facing “rapid and premature decline” unless it transforms the way it operates within the next two years, the authors of a new report on the ailing sector have warned.

Industry and government must come together to agree a “blueprint for action” to revive the sector, taking lessons from countries such as Norway and Saudi Arabia, the research from global accountancy firm PWC stated.

The stark warning came as the crisis-hit sector’s industry body Oil and Gas UK warned of up to 120,000 job losses in the next two years following the plunge in oil prices.

An estimated 84,000 jobs linked to the industry were shed in 2015, with 40,000 losses expected this year, Oil & Gas UK has stated.

Despite the bleak outlook, the PWC report revealed “significant levels of optimism” that, with the right strategy, the North Sea can continue to provide a few more decades of production.

Alison Baker, of PwC, set out the report’s key findings, which were based on interviews with more than 30 senior figures in the industry from the UK, Norway and the Netherlands.

She said: “During our interviews we picked up a real sense of urgency to create one last cycle of success that will retain and generate jobs, stimulate growth and ensure security of energy supply.

“But this was matched by a level of frustration at the fundamental issues that need tackling to avert the risk of rapid and premature decline.”

The report – entitled A Sea Change – found the majority of respondents want government to take a lesson from Norway and Saudi Arabia, and “be bold in setting out their blueprint for the future”.

Kevin Reynard, PwC office senior partner in Aberdeen, said: “The North Sea still has a strong couple of decades ahead of it but the decisions to sustain it in that period need to be taken quickly.

“It’s vital that governments and industry come together and agree a blueprint for action.

“No one company standing alone can weather this but if all interested parties join forces to address the issues then there is hope for the North Sea.

“Government and industry have started to come together but this can be built on for the future.”

Scotland’s Economy Secretary Keith Brown said the findings showed the need for the UK Government to use its powers to provide additional financial support for oil and gas exploration in the North Sea.

Brown said: “This report supports our firm view that the North Sea continues to represent a huge opportunity for Scotland, with many billions of barrels of oil reserves still to be recovered, and it is heartening that this optimism is shared by industry leaders.

“While we are doing everything within our current powers to support the sector, the UK Government retains control of the main economic levers affecting the industry, including power over the fiscal regime and incentives to invest in exploration.

“It is clear that further support is likely to be required to ensure the industry’s success over the longer term.”

An Oil & Gas UK spokesman said that its annual conference, being held at Aberdeen Exhibition and Conference Centre tomorrow and Wednesday, would allow industry leaders to look at how key changes could be made to the sector.

The spokesman said: “Of course more needs to be done and with some urgency. This is why industry is leading the way by learning from other basins, sectors and each other as to how to improve its performance, in areas such as the use of technology and innovation.

“This will be the focus of our conference next week, where industry will come together to discuss the changes needed for a sustainable future that we all need to work towards”.

Environmental charity WWF Scotland said the challenges facing the oil and gas sector highlighted the need for “cleaner forms of energy production”.

WWF Scotland director Lang Banks said: “Our economy will continue to rely on oil and gas for some time to come, but PwC are absolutely right to highlight the need to prepare for the inevitable transition to a zero-carbon future.”