Windfall taxes will kill off the North Sea within a matter of years unless the Government eases the burden on firms, oil producers have warned.

The so-called Energy Profits Levy (EPL) will see UK oil and gas output plunge by 40pc by the end of the decade, according to Offshore Energies UK (OEUK), making the country increasingly reliant on costly foreign imports.

The windfall tax, initially set at 25pc in 2022 but hiked to 38pc and extended to 2030 under Labour, is already accelerating the decline of offshore production by deterring vital investment plans, the lobby group warned.

Around 1,000 jobs a month are being lost in the North Sea, it said, with 90pc of firms involved in the supply chain seeking work abroad owing to a lack of demand in the UK.

Harbour Energy, one of the UK’s largest oil and gas producers, announced plans to cut 250 jobs earlier this year after saying windfall taxes had made Britain’s energy industry unprofitable.

It comes after the Office for Budget Responsibility revised down estimates for how much the tax will raise between 2023 and 2028 to £21bn, down from £66bn previously.

David Whitehouse, OEUK’s managing director, called on Rachel Reeves to overhaul the tax in her Autumn Budget to avoid “the North Sea industry’s collapse”.

He said: “Without changes to the fiscal regime, UK oil and gas could disappear within years, not decades. That’s a risk we cannot take. We need both oil and gas and renewable energy.”

Estimates suggest that up to 15bn barrels of oil and gas will be needed between now and 2050, even in the event of Britain’s net zero goals being met.

He said UK producers are currently on track to meet only 4bn barrels of that demand.

OEUK pitched proposals to the Treasury for replacing the EPL with a permanent mechanism that would be activated only when both oil and gas prices exceeded a set threshold.

While that would mean a £6bn hit to short-term tax receipts, the lobby group said it would deliver far more to the public coffers in the longer term by sustaining the offshore industry through the transition to renewables.

It said the proposals would secure £41bn of extra investment for UK energy by 2050, deliver £12bn in additional tax receipts and provide a £137bn boost to the economy, and at the same time support 23,000 offshore jobs.

Mr Whitehouse said oil and gas operators would still pay higher taxes when prices were high, while knowing that the levy would be adjusted were they to drop.

The plea from the oil industry comes as Kemi Badenoch prepares to commit to extracting as much oil and gas from the North Sea as possible.

The Tory leader is expected to use a speech in Aberdeen to pledge to abolish all environmental restrictions on fossil fuel extraction, establishing a clear dividing line with Energy Secretary Ed Miliband’s plans to ban new drilling licences.

OEUK said the EPL would block the development of new oilfields and stall existing projects regardless of the rules on drilling by creating a “no new investment” scenario.

It said that if tax reforms are introduced, new projects could replace declining fields and satisfy half of demand, whereas without investment the country will be reliant on imports for over 80pc of its needs.

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