The Tory-Lib Dem government performed a mini U-turn on the North Sea yesterday, cutting a tax George Osborne increased in 2011.
The move was part of a series of measures designed to boost investment in oil and gas.
Production has fallen since the Chancellor announced a £2 billion raid on profits in only his second Budget three years ago.
At that stage he raised the supplementary charge on oil industry companies' profits, from 20% to 32%.
Yesterday he announced an immediate cut from in the rate 32% to 30%.
Ministers wanted to ??reduce the rate further in an affordable way" he indicated to encourage investment and drive higher production.
The move was largely welcomed by the industry but attacked by environmentalists for offering "tax breaks to wealthy oil firms".
Mr Osborne also announced that a ring-fenced expenditure supplement for offshore oil and gas activities would be extended from six to 10 years.
A new "cluster area allowance" will also be brought in to encourage exploration and support investment in areas defined as 'technically challenging projects.
Ministers expect this will lead to the development of new fields.
Malcolm Webb, the chief executive of industry body Oil & Gas UK, said the cut in the supplementary charge was "an important first step" but further reductions were needed to ensure the long-term future of the industry.
Alan McCrae, head of energy tax at PwC, warned that, despite the measures, falling oil prices could prove "fatal" for some of the older and marginal fields in the UK.
But Derek Leith, Ernst & Young's UK head of oil and gas taxation, who described the changes as ??modest??, said they could prove to be a turning point for exploration and production.
"It's a clear indication that the Government has listened to representations made by industry and is willing to lessen the burden on companies operating in the basin."
But WWF Scotland director Lang Banks said: "The last thing we need to see is even more tax breaks or subsidies for new North Sea oil drilling.
"The climate science is clear, the vast majority of known fossil fuel reserves need to be left in the ground and not exploited.
"We instead need to see an energy transition that enables us to harness the engineering skills currently deployed in the oil and gas industry and apply them to supporting a range of cleaner forms of energy production."
Lib Dem Chief Secretary to the Treasury Danny Alexander will today (THU) unveil the findings of an official review into oil and gas in Aberdeen.
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