The oil and gas industry has been rebuffed by the Treasury over its call for stronger incentives to invest in the North Sea, sparking warnings that Britain risks leaving badly needed resources in the ground.

Investment in the North Sea is likely to have fallen in 2008 for a second successive year, in spite of the steep rise in oil prices. The number of wells drilled to develop fields is on course to be about the same as last year, which was 15 per cent fewer than in 2006.