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The UK oil industry was thrust to the centre of the debate about Scottish independence on Monday as the London and Edinburgh governments touted rival visions of how to husband the North Sea’s remaining bounty.

But the debate masked a stark truth: the basin is long past its prime, and its remaining oil and gas will be increasingly expensive and difficult to extract for whoever controls it.

Prime minister David Cameron warned that Scottish independence would undermine the oil industry, arguing that the “broad shoulders” of the UK were needed to support the necessary level of investment in North Sea oil.

He also backed a report from Sir Ian Wood, the former chairman of oil services company John Wood Group, on getting the most out of the UK continental shelf. Ministers say the report’s recommendations, which include the creation of a regulator with a specific brief to maximise extraction, could deliver 3bn-4bn additional barrels of oil over the next 20 years, worth about £200bn to the UK economy.

The Scottish government also backed the Wood report but Alex Salmond, first minister, said an independent Scotland would guarantee “a much more stable, long-term policy” on oil. “We’ve had 16 tax changes in the North Sea in 10 years, we’ve had 14 oil ministers in the last 17 years,” he said.

Amid the fanfare of competing visions for the future, the reality is that most of the North Sea’s oil has already been pumped.

About 42bn barrels of oil equivalent have been extracted from UK waters since the 1970s. Production peaked in 1999, yet industry estimates suggest between 12bn and 24bn remain to be produced.

Whether all of it will be remains an open question. The offshore industry is undergoing a slowdown, with production falling 38 per cent over the past three years. It is still unclear whether the rot can be stopped.

Part of the problem is the basin’s age. Production efficiency has fallen sharply because ageing infrastructure – such as pipelines and platforms – requires increased maintenance, leading to more downtime and a higher risk of outages.

At the same time, exploration has hit an all-time low, so companies are not finding new oil to replace barrels extracted. The few discoveries being made are small, and often in deep waters or located deep below the seabed in high-temperature high-pressure reservoirs that are tricky and expensive to unlock.

Their task is not helped by the fact the UK continental shelf is now one of the priciest offshore basins in the world. Development costs per barrel have risen fivefold over the past decade.

“We’re seeing high levels of cost inflation in the UK sector, and that’s eroding the value of some projects, which companies are being forced to reassess,” says Lindsay Wexelstein, head of UK upstream research at Wood Mackenzie. “I don’t think the Wood Review’s recommendations really address that issue.”

The mood in the global oil industry does not help. Squeezed between rising costs and a stagnant crude price, big oil companies are under pressure from shareholders to improve returns. They have responded by trimming their often huge investment budgets.

The consequences are already clear. Two big UK offshore projects have been put on hold. Meanwhile, smaller companies that have taken over older fields from the majors or are developing smaller finds face a funding gap that has held up projects.

Another big problem is tax. It took years for the industry to recover from the Treasury’s £2bn tax raid on the sector in 2011. Some new tax allowances for certain kinds of fields have helped. But the UK still compares unfavourably with countries such as Norway.

Richard Power, partner at law firm Berwin Leighton Paisner, said it was debatable whether a new regulator would make much of a difference.

“A better solution might be to offer the carrot of further tax breaks to exploit fields, just as they do in Norway, rather than the stick of increased regulation,” Mr Power said.

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