A consultant for the Oil and Gas industry has said that the Government’s changes to the taxation of North Sea oil companies will be costly and will undermine the potential of future discoveries.

Jim Hannon, Director at Hannon Westwood, said: “The effect of the Government’s changes in the North Sea will be costly for small emerging oil companies. We are already seeing their share prices tumble as the investment market downgrades the value of future new oil production.

“What this means is that we are undermining the fabric of the next wave of capital investment and with it, tens of thousands of jobs and a worldwide skills base.”

Mr Hannon warned that the budget announcements would harm the future of UK energy supply: “We have about 8 billion barrels in discoveries in new oil and gas, and much more in undrilled prospects, all capable of securing our UK energy supplies for years to come, and this latest move on tax comes at a sensitive time when major capital investment is crucial.”

“We are hoping, therefore, that there will be some retrospective and targeted Government action beyond this tax measure that will restore confidence.”