A dwindling pool of engineering workers threatens a skills shortage in the oil and gas industry, a new report has warned.

The trend is driving up pay to “unprecedented” levels in some areas, according to a report by technical advisers DNV GL.

The outlook for the sector this year is positive but a shortage of skilled employees will be the main barrier to growth, the report said.

Elisabeth Torstad, of DNV GL, said: “The sector is increasingly moving into challenging environments which require deep technical expertise to provide solutions, yet many companies are faced with ongoing skills shortage.

“This need is driving up salaries at a time when there is already pressure to reduce costs. Technology can go some way to plugging the gap but it can’t fully replace human intervention.

“The industry needs to take a longer term view of building professional skills, rather than putting the brakes on nurturing talent when the oil price weakens.

“While we cannot fully replace the experience of retiring professionals in the sector, we can work smarter through structured approaches to managing industry knowledge and ensuring the competence built is effectively transferred to younger generations.”