Rishi Sunak has said he wants to encourage more investment in new fossil fuel drilling – potentially derailing the UK's climate targets.
Scientists said in the run-up to the COP26 climate summit last year that new fossil fuel exploitation is incompatible with reaching net zero in time.
But the chancellor said on Thursday that encouraging drilling under the North Sea would "support British jobs" and should get the green light.
"I want to make sure that people acknowledge that we should also exploit our domestic resources," he told a press conference.
"We have resources in the North Sea, and we want to encourage investment in that because we're going to need natural gas as part of our transition to getting to net zero.
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"And in the process of getting from here to there, if we can get investment in the North Sea that supports British jobs, that's a good thing. So that has to be part of the mix as well."
The chancellor's comments come after the government invited oil and gas companies to help write a rulebook on whether new drilling complies with the UK’s climate obligations.
Ministers have previously been accused by environmentalists of living in a “fantasy” for claiming new drilling is compatible with taking action to tackle the climate emergency.
Mr Sunak's comments conflict with a report by the International Energy Agency, commissioned by the UK’s own Cop26 president Alok Sharma, which warned last year that new oil and gas production was incompatible with reaching net zero by 2050.
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A separate domestic review carried out by the government, however, said that drilling could proceed subject to some conditions.
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Those conditions are now set to be determined in part by the industry itself, which has been invited to develop a "checkpoint" that would decide which drilling projects could proceed.
The International Energy Agency’s pathway to net zero by 2050, drawn up in May 2021, says that, under a balanced scenario, “there are no new oil and gas fields approved for development” after 2021.