DAVID Cameron defended the controversial hike in North Sea taxes by the Coalition Government after ministers gave BP the go-ahead for another massive project west of Shetland.

The oil and gas giant has been cleared to proceed with the second phase of the development of the Clair field, in which BP and partner companies will invest £4.5bn.

Called Clair Ridge, this is one of four giant North Sea projects in which BP will invest a total of £4bn over the next five years.

It said these will provide 3000 jobs in the supply chain and help safeguard the future of 3500 jobs in the North Sea operations, which it runs from Aberdeen.

BP’s chief executive Bob Dudley said the project showed BP’s enthusiasm for an area where he said the company could remain active for 40 years or more.

The Prime Minister said the investment would provide a massive boost to jobs and growth.

In a sign of the importance the Government attaches to the investment, Mr Cameron visited BP’s Aberdeen base yesterday to talk to staff.

He said: “It shows the confidence there is to invest in the North Sea – we have cutting-edge technology, world-class skills and expertise and a UK Government that is committed to do what we can for future investment.”

The last phrase may raise eyebrows following the Government’s decision to increase North Sea taxes by 12 percentage points in the March Budget.

This was condemned by some industry leaders who warned it could lead firms to slash investment off Scotland.

But Mr Cameron told reporters it was right to ask the industry to shoulder a bigger burden:

“Since the tax was last changed (by Gordon Brown in 2005) the oil price has almost doubled and I think, given the difficult situation the country faces in terms of our record deficit and the need to pare back Government spending and to make sure we’re raising taxes in a fair way... it’s perfectly fair to ask for a greater contribution from the North Sea.”

Mr Cameron claimed that by helping to avoid increases in fuel duty proposed by the last Labour Government, the tax rise had allowed the Government to provide benefits for all.

He insisted ministers had done this without damaging the oil and gas industry.

“As we see today, investment is going ahead,” the PM said.

He added: “There’s a balance to be struck between how much tax the Government should take and how much is necessary to encourage investment in the North Sea, and I think the balance is appropriate.”

However, Mr Cameron signalled that ministers could make further tweaks to the fiscal regime in the North Sea.

He said: “I think it’s important for jobs and investment in the North Sea that we try and make sure we look at all potential ways of getting marginal fields onstream and recovering more oil from fields that are onstream.”

Mr Dudley said the tax regime could create complications when considering other smaller developments.

But he made it clear that he believes there should be plenty of money to be made in UK waters for decades – even at the higher tax rate.

“BP has produced some five billion barrels of oil and gas equivalent from the region and we believe we have the potential for over three billion more,” said Mr Dudley.

He added: “After some years of decline we now see the potential to maintain our production from the North Sea at around 200,000 to 250,000 barrels oil equivalent a day until 2030. We are working on projects that will take production on some of our bigger fields out towards 2050.”

The confirmed projects include the £3bn redevelopment of the Schiehallion and Loyal fields west of Shetland, announced earlier this year, the £550m Devenick gas field in the central North Sea and the South West Clair extension.

BP’s Partners in Clair Ridge are Shell, ConocoPhillips and Chevron.