But the Scots want more concessions for an industry suffering from the worst two years for oil sector in recent history.
In his budget speech to Westminster, Osborne said he would reduce the headline rate of tax paid on UK oil and gas production falling from 50-67.5% to a rate of 40% across all fields.
“The oil and gas sector employs hundreds of thousands of people in Scotland and around our country,” Osborne said.
"In my budget a year ago I made major reductions in taxes, but the oil price has continued to fall so we need to act now for the long term.
"I am today cutting in half the supplementary charge on oil and gas from 20% to 10% and I am effectively abolishing Petroleum Revenue Tax too - backing this key Scottish industry and supporting jobs right across Britain."
The cut in the supplementary charge, an added tax on the profits of oil companies, will be backdated to January 1.
Osborne introduced the supplementary tax in 2011.
In his budget statement, he said Petroleum Revenue Tax would be "effectively abolished", having cut it last year from 50% to 35%.
It will now stand at 0%.
The decision to scrap taxes on struggling North Sea oilers was welcomed by lobby group Oil & Gas UK, which has been haranguing the government to axe the tax in recent months.
OGUK CEO Deirdre Michie welcomed the move, which she said was “further progress” in modernising the tax regime for an increasingly mature basin.
“We welcome these measures as they will build on the industry’s achievements in improving efficiency in the face of low oil prices, boosting the sector’s competitiveness and helping to restore investor confidence,” she said.
But she indicated the industry wanted more concessions.
“We will continue to work with the Treasury to complete its ‘Driving Investment’ plan to ensure that the fiscal regime reflects the business needs of a maturing basin and signals to global investors that the UK is truly open for business,” she said.
Michie hopes the tax cuts will also help support exploration, a hope shared by the Scottish National Party, which has expressed disappointment at the lack of exploration or production allowances for the industry.
Scottish Labour leader Kezia Dugdale also said support for the oil and gas industry did not "go nearly far enough".
"What we needed to see from the chancellor today was support to make sure that essential infrastructure such as platforms and pipelines are not decommissioned early," she said.
Dugdale believes that the UK government should take stakes in North Sea oil and gas assets that are strategically important but at risk of abandonment, propping them up until prices recover.
She says that the government should set up a public company called the UK Oil Investment to ensure strategic assets remain viable
The UK previously did something similar in the 1970s, but those assets were sold off my Margaret Thatcher.
The industry has been badly affected by the drop in oil price with investment falling sharply, with nearly half of all oil fields making losses and tens of thousands of jobs lost over the past 18 months.
The budget also provided certainty on the availability of decommissioning tax relief, where an asset is transferred but the decommissioning liability is retained by a previous owner, which should assist the asset trading market.
The government has also increased the powers of Britain’s Oil and Gas Authority to decommission oil fields, something the government says will help reduce costs for the industry.
Oil & Gas UK also notes that there has been further adjustment to the investment allowance to facilitate investment in infrastructure, which will also support the drive to maximise economic recovery.
The UK government said the North Sea budget measures were worth some $2 billion over five years.
The Tory government has also axed the Carbon Reduction Commitment and will increase the climate change levy from 2019.
It will also run some $1.5 billion in further auctions to back renewable technologies, and will develop more modular nuclear reactors.