Research by a leading oil analyst has shown that a low oil price combined with high borrowing costs could mean more than half of the oil and gas left in the North Sea remaining there.

The study, by Professor Alex Kemp and Linda Stephen of the University of Aberdeen, shows how sensitive activity levels in the North Sea are to variations in oil and gas prices and the costs of obtaining loan and equity capital.

It reveals that between 2008 and 2035, with a weighted average cost of capital of 10% in real terms and a capital productivity requirement of 0.3 (the return per pound), more than 600 fields or projects could be developed with oil at $80 a barrel. That would fall to only 140 fields at $40. With the cost of capital at 15% and oil at $80 the maximum number of projects would be 509 falling to only 85 at $40.

The study also looked at production levels in the next 25 years and with capital at 10% and oil at $80 a barrel 19.9 barrels of oil equivalent will be produced.

However at 15% for capital and oil at $40 a barrel, only 9.9 billion of the UK Government's estimated recoverable reserves of 21.6 billion would be produced.

"If investments are made at $80 then the outlook for the North Sea is really very good," said Kemp.

"There is a lot of activity with a lot of production coming through by 2035 and a lot of investment. However going down to $60 produces quite a bit less in terms of new field development, ultimate production and investment.

"Although some people might think $60 is still a very high price, given the cost escalation over the last several years some projects would be hit and there would be a fair reduction in activity. That is the central message."