The Labour government, elected in July, has said the changes will help to achieve a ramp-up in renewable power and shift from oil and gas to reduce carbon emissions and help curb global warming.
Industry group Offshore Energies UK forecast the changes would reduce tax revenue by 12 billion pounds between 2025 and 2029 compared to the current tax regime.
Capital investment in the sector over the period is expected to fall to 2.3 billion pounds from around 14 billion pounds, OEUK said.
The proposed tax changes "will trigger an accelerated decline of domestic (oil and gas) production, and a corresponding reduction in taxes paid, jobs supported, and wider economic value generated," OEUK CEO David Whitehouse said in a statement.
North Sea focused NEO Energy said the fiscal and regulatory uncertainty would slow investment across its portfolio.
NEO owns half of the Buchan Horst development project in the UK North Sea with Serica Energy and Jersey Oil & Gas owning 30% and 20%, respectively.
Production in the mature North Sea basin has declined from a peak of 4.4 million barrels of oil equivalent per day (boed) at the start of the millennium to around 1.3 million boed today.
The changes will also include scrapping the levy's 29% investment allowance, which lets companies offset tax from capital that is re-invested.
A Treasury spokesperson said: "We are committed to maintaining a constructive dialogue with the oil and gas sector to finalise changes to strengthen the windfall tax, ensuring a phased and responsible transition for the North Sea."
(Reuters, September 2, 2024)