OIL and gas companies will cough up an extra $6 billion in tax over the next decade under plans by the Federal Government to overhaul resource taxes.

But the tax plan has prompted warnings that it may stop vital exploration.

Five years after axing the mining tax, Treasurer Josh Frydenberg revealed the Government will change key parts of the Petroleum Resource Rent Tax to deliver a major financial windfall to Canberra just in time for the looming Federal election.

Most of the extra will come from WA LNG projects including Gorgon and Wheatstone.

Under the plan, from July 1 next year the law will stop companies taking losses on unprofitable gas exploration and using them to reduce taxes on highly profitable operations.

Limits will be placed on excessive compounding of deductions for exploration.

Onshore projects will be removed from the PRRT, despite only being brought into the scheme in 2012.

Mr Frydenberg said the changes “better reflected” the petroleum industry.

“These changes will ensure production of our petroleum resources are taxed appropriately while continuing to support the development of our world-leading LNG industry,” he said.

It will also provide $6 billion in extra revenue until 2028-29.

Shadow treasurer Chris Bowen signalled the ALP would back the changes.

The move by the Government, more than a year after a review into the PRRT arrangements was released, caught the industry by surprise though the push for more tax has been growing.

After paying $1.9 billion in resource taxes in 2014-15, the sector is only expected to pay $1.4 billion despite soaring oil prices and a big increase in export volumes.

Australian Petroleum Production and Exploration Association chief executive Malcolm Roberts said there were real concerns about how the changes might affect oil and gas exploration.

“While Australia has attracted significant investment in LNG projects over the last decade and global demand for LNG continues to rise, future investment in Australia is far from guaranteed,” he said.

“The global gas market is highly competitive and we are not a low-cost producer.”

Exploration has dropped sharply even with this year’s increase in oil prices.

In WA, exploration dropped from $600 million in the December quarter of 2014 to $200 million over the past three months.

Jason Ward, principal analyst from the Centre for International Corporate Tax and Accountability Research, said the move was positive even though the Government could have gone further.

He said gas powerhouse Qatar would get $26 billion in royalties from its LNG production, while Australia would get zero on the same volume.