Royal Dutch Shell plans to cut 180 jobs from its North Sea operations as oil and gas production declines.

Shell said that the job losses would be mainly administrative positions at its headquarters in Aberdeen and would take place over the next three years as part of an efficiency drive.

Shell, the world's second-largest listed oil company, has been scaling down its North Sea operation since June, when it put part of it up for sale and dropped plans for a £25 million new base in Aberdeen.

Production of North Sea oil peaked in 1999 at about six million barrels per day and has been in steady decline since. It is expected to be about one third of the peak level by 2020.

Shell said that it had made the cuts to ensure its long-term competitiveness in Britain and that rising industry costs had forced it to take action.

Staff in Aberdeen, where Shell employs 2,500 people, were informed of the decision by Tom Botts, Shell Europe's vice-president of exploration. This month, Jeroen van der Veer, Shell's chief executive, told The Times that the industry was struggling with “absolutely staggering cost increases . . . We see it running across the industry at about 20 per cent. Shell has managed to keep inflation below that level for the past few years by locking in rigs early or splitting contracts to get more competition, but there is only so long that you can do that for.”

Shell has not been alone in cutting jobs in the North Sea, where significant oil and gas discoveries were first made in the 1970s. Last October BP said that it planned to cut 350 jobs from its onshore North Sea workforce. Other producers have also been looking to refocus on areas where there is more potential for large new discoveries.

Experts believe that there are still up to 25 billion barrels of oil and gas left in the North Sea but in recent years old wells have begun to run dry.

John Gallagher, Shell vice-president technical, said: “The organisational changes announced today will better position Shell to focus on our strengths. We will bring our advanced technology into play and better deliver competitive projects in the North Sea.” Shell employs 8,500 people in the UK.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts