The struggling North Sea oil industry is calling on the Government to slash taxes in the face of the plunging price of oil – or risk paying a penalty of £20billion.

Offshore producers are threatening that the falling price combined with tax rates on North Sea supplies mean increasing numbers of oil fields will become uneconomic.

The costs of closing down oil wells can be substantial and agreements between Government and the industry state that part of those bills are met by the taxpayer.

Struggling: The North Sea oil industry is calling on the Government to slash taxes in the face of the plunging price of oil – or risk paying a penalty of £20billion

Michael Tholen, economics director at Oil & Gas UK, the group which represents the industry, told The Mail on Sunday that the total cost of decommissioning in the North Sea was expected to be £40billion. He said: ‘Half that cost will be borne by the Exchequer.’

The price of crude oil plummeted further last week after a crucial meeting of Opec countries decided to keep up the current levels of production despite weakening global demand.

Brent crude fell to below $72 (£46) a barrel, dropping 10 per cent in a week. It is down almost 40 per cent since it hit $115 in June.

Oil & Gas UK wants the £2billion a year tax hike on the industry imposed in 2011 – a 12 percentage point increase levied by Chancellor George Osborne – to be reversed.

Tholen said: ‘We need to see massive changes in the tax rates. In 2013 we spent every pound we earned in investing, running and exploring for oil. This year we will be spending £3billion more than we are earning to do the same thing.

‘We cannot sustain this business for too much longer without things changing radically. At $70 a barrel, decommissioning oil fields moves centre stage for many companies.’

The North Sea attracted a record £14billion of investment last year, but Oil & Gas UK believes that will halve over the next four years.

The Chancellor is expected to outline the results of a Treasury review into the tax regime of the North Sea oil industry in Wednesday’s Autumn Statement.