Following the outbreak of the Iran war, the Chancellor backtracked on plans to announce an early end to the Energy Profits Levy, which is due to expire in 2030.

A spike in energy prices as a result of the Middle East crisis led Ms Reeves to put those plans on ice, which has infuriated the industry.

Oil and gas firms are reported to have identified North Sea projects which could deliver the equivalent of more than a billion barrels of oil and gas by the end of the decade.

They are said to have told the Chancellor early last month that they were prepared to push ahead with those projects, but only if the Government scrapped the windfall tax early.

One industry figure said a decision to delay the switch from the current Energy Profits Levy to an Oil and Gas Price Mechanism was ‘economic illiteracy on steroids’.

It comes amid mounting pressure on Ms Reeves and Energy Secretary Ed Miliband to soften their stance on the UK’s oil and gas reserves.

Mr Miliband has banned new oil and gas exploration off Britain’s coastline as part of his Net Zero agenda, but – in the wake of the Iran war – is facing calls by Labour MPs and trade unions to allow more drilling.

The Energy Profits Levy was introduced as a temporary measure by the previous Tory government following Russia’s full-scale invasion of Ukraine, which led to a spike in energy prices.

Combined with other taxes, it means the overall tax rate faced by oil and gas companies operating in the UK is currently 78 per cent.

The Oil and Gas Price Mechanism, which will only apply when oil and gas prices are above a certain level, is proposed to replace the Energy Profits Levy from 2030 – or earlier if a price floor is triggered.

Government ministers had been holding meetings with industry for months to explore ending the Energy Profits Levy early, before March 2030, but shelved those plans when the Iran conflict began.

Sources in the energy sector told The Times that, without a tax overhaul, it would remain unviable to push ahead with a multi-billion pound investment programme.

One said: ‘Oil and gas companies have had their North Sea profits all but wiped out by a punitive energy profits levy that has made the UK virtually uninvestable.

‘That remains the case under the current price of oil and gas and the government is wrong to conflate much larger global profits with meagre returns in the North Sea.

‘It would be economic illiteracy on steroids if the government were to choose not to seize a £17billion investment opportunity by 2030, which is predicated on an early move from EPL to OGPM.

‘Every £1 invested by the oil and gas sector generates around twice that amount in GVA [gross value added] — so the government would effectively be turning down over £30 billion in additional value to the UK economy.’

But a Government source told the newspaper that oil and gas companies were likely to make ‘significant’ profits because of the Middle East crisis at a time when the public finances are under mounting pressure.

‘Iran totally changed the dynamics,’ they said.

A Government spokesperson said: ‘We’re giving the sector and its investors the long-term certainty to plan, invest and support jobs with plans to replace the Energy Profits Levy when it ends by 2030, or earlier if its price floor is triggered.

‘We are also making sure the North Sea has a prosperous and sustainable future through record investment that helps deliver the next generation of skilled jobs while growing the clean energy industries of the future.’