Shale gas could bring “thousands of jobs, billions of pounds of business investment, and lower energy bills”, the Chancellor said on Thursday as he confirmed generous tax breaks to encourage fracking.

Under plans in the Autumn Statement, the tax rate for initial profits made by shale explorers will be roughly halved – saving companies an extra 24p in tax for every £1 they spend on the project.

The measure is designed to “kick start the exploitation of onshore oil and gas (including shale gas)”.

Mr Osborne had previously promised that the tax breaks – first mooted more than a year ago – would make Britain the most generous fiscal regime in the world for shale gas.

The Autumn Statement on Thursday said the UK shale gas tax regime would be “the most competitive in Europe” and would also have an “effective tax rate for shale gas projects lower than in the US”.

The Chancellor has been an enthusiastic backer of shale gas, which has dramatically lowered bills in America. But experts urged caution over hopes it would do the same in the UK, even with the benefit of tax breaks.

“The commercial and technical challenges to accessing shale gas, which are the key barrier to production, remain,” Emma Wild, oil & gas director at KPMG, said.

“Accordingly, the prospect of significant new onshore oil and gas production materially affecting the UK energy mix is still highly uncertain.”

The tax breaks will apply to all onshore oil and gas explorers, not just those looking for shale gas – which requires fracking to extract.

The controversial process involves pumping water, sand and chemicals into the ground at high pressure to extract gas trapped in the rocks.

The new tax breaks are structured so that when a shale gas firm starts making taxable profits from selling gas, it will be taxed at 30 per cent rather than the usual 62 per cent. The allowance lasts until such a time as their taxable profits equal 75 per cent of money spent developing project.

So for a project costing £100 million, a company would be eligible for the reduced rate for their first £75m of taxable profits – saving them £24m.

They are already also eligible for full tax relief on capital expenditure, which reduces their taxable profits.

Treasury documents show the tax breaks would cost £5m in 2016-17, rising to £20m a year for 2017-18 and 2018-19.

This cost would be due to companies reducing their existing tax liability, by claiming relief for the capital costs of the new shale gas projects that would now go ahead thanks to the tax breaks.

Further into the future, when the new shale gas projects were up and running, the Treasury would see a benefit, however as “additional production and profits which would arise from successful onshore developments would be expected to increase Exchequer yield”.

Derek Leith, head of oil and gas taxation at EY, said: “These fields are not commercially capable of attracting investment at a rate of 62 per cent tax. If we give a field allowance, we will get 30 per cent tax where we would have got nothing if we had no allowance.

“The successful development of shale gas reserves in the UK would improve security of supply and create value for industry and the Exchequer.

“However, significant investment is required to bring this about with considerable uncertainty of commercial success.”