The Association of British Independent Exploration Companies (Brindex) has told Chancellor Jeremy Hunt that the UK is now one of the most fiscally unstable and complex regimes for oil and gas companies.
There is mounting concern in the offshore sector about what will be unveiled in the Budget on Thursday, November 17.
Tory politicians are believed to be preparing to unleash a second round of windfall taxes on oil and gas producers as part of their cash-raising plans.
It is understood that the controversial energy-profits levy on offshore operators could be raised from 25% to 30% and extended by three years to 2028. Officials have also been working on plans to widen the windfall tax to include electricity generators.
Energy Voice reports that Brindex has now written to the chancellor to warn that an increase in the windfall tax would hit the "appetite and financial ability" to invest.
Chairman Robin Allan said: "The recently-enacted levy and speculation about further fiscal changes have created huge uncertainty for independent oil and gas companies. Our oil and gas projects are long term, with investment profiles often greater than 10 years.
"We need to be certain of the fiscal regime before we start to invest."
Fiscal uncertainty of the new tax
He stated that the new tax has created "long-lasting fiscal uncertainty" and elevated the UK to one of the most fiscally unstable and complex regimes to do business in.
Mr Allan added: "Yet another change to the tax regime, in just a matter of months, would be disastrous to this sector."
Brindex does not include oil majors who can afford another levy, the chairman pointed out.
"Our members are not the supermajors who, with the help of their large trading operations, are reporting billions in worldwide profits, much of which is taxed outside the UK.
"Our members are being unfairly treated by the levy, which hurts us disproportionately more than the supermajors."
Trade body Offshore Energies UK said last week that it wanted an urgent meeting with the chancellor.
Its chief executive Deirdre Michie stated that "ongoing uncertainty and continuous changes to the fiscal regime are driving investment out of the UK and also encouraging some companies to exit the basin".
Clear message
In other developments last week, one oil and gas boss warned the chancellor that any fresh changes to taxation of the sector will send a clear message to global energy investors about whether the UK is the right place to put their money.
Sam Laidlaw, executive chairman of Neptune Energy, stressed that a stable and predictable tax regime was the foundation for investor confidence.
And the chief executive of the largest London-listed independent oil and gas company told the UK Government to "carefully consider" the consequences of any changes it may make to the windfall tax.
Linda Cook, of Harbour Energy, said: "The recently-enacted UK energy profits levy and speculation about further fiscal changes have created uncertainty for independent oil and gas companies like Harbour.
"As a result, evaluating expected returns from long-term investments has become more difficult and investors are advocating for geographic diversification."