The UK government must prioritise continued "frictionless" access to EU markets and labour for the oil and gas industry during the Brexit negotiations, an industry body has warned.

In a letter to prime minister Theresa May, Oil and Gas UK chief executive Deirdre Michie warned that the cost to the industry of continued trade with the EU was likely to "almost double" under a 'worst-case' scenario, under which the UK does not negotiate a preferential trade deal with the EU and the rest of the world and instead reverts to World Trade Organisation (WTO) rules.

A 'best case' scenario, under which the UK negotiates minimal tariffs with the EU and improved tariffs with the rest of the world once it is no longer required to trade on the same terms as other member states, could actually save the industry around £100 million a year, according to the figures, which were compiled by consultancy EY on behalf of Oil and Gas UK.

The UK oil and gas industry currently trades around £73 billion worth of fuel and non-fuel goods and services with the rest of the world, at a total cost of around £600m a year. This cost could rise to £1.1bn with tariffs applied to trade in certain goods under WTO trade rules, assuming trade patterns and volume remain unchanged

Of those directly employed by the industry, 5% are non-UK EU workers and 5% are international workers from the rest of the world. However, around 70% of the roles filled by EU workers are skilled and many are critical for project delivery, meaning that the sector could be particularly affected by post-Brexit limits on free movement of skilled labour from the EU.

Michie said that, as an apolitical trade body, Oil and Gas UK had not taken a position on the UK's decision to leave the EU. However, it commissioned the research because "we need to understand the possible impact on our industry - and the possible opportunities - from exiting the EU", she said.

"During the global industry downturn, our industry has continued to focus on increasing its production efficiency, and on its unit operating costs which have improved by almost 50%," she said. "We are becoming a more globally competitive industry, but we continue to be very sensitive to any additional burdens either in relation to cost, or restrictions on the movement of key personnel required for critical operations."

"Oil and Gas UK would welcome discussions with government officials to outline industry's concerns and opportunities and help identify a path forward during Brexit negotiations. Our request of government is that any change, whether domestic or European, is managed in a manner that minimises risk to the oil and gas industry and provides predictability and clarity wherever possible through constructive dialogue and consultation," she said.

As well as ensuring continued access to EU markets and labour, the government must also act to protect energy trading and the internal energy market and allow the UK industry to maintain a strong voice in Europe, Michie said in the letter. Other EU policy issues such as emissions trading are "critical" to the oil and gas industry, and "will require negotiation with European counterparts, as well as discussions at the domestic level between government, regulators and industry during the Brexit process", she said.

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