The money will be used by the Oil and Gas Authority (OGA) to survey under-explored areas of the UK Continental Shelf (UKCS) to find potential new deposits.
The investment was announced during a recent visit by Chancellor Philip Hammond to Aberdeen and Dundee.
The news comes as the Oil & Gas Technology Centre in Aberdeen revealed its work on new subsea technologies could help unlock 400 million additional barrels of oil and gas from the North Sea, adding a further £3bn of value to the industry.
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Chancellor Hammond said: "The oil and gas industry remains vital for the Scottish economy and the UK as a whole. The £5 million funding I am announcing will help exploration to find potential new deposits, and boost prospects for jobs in Aberdeen and the surrounding area. This continues the UK government's extensive package of tax and funding support for the industry and the wider Scottish economy."
UK Energy Minister, Richard Harrington, added: "North Sea oil will continue to fuel growth and jobs across Scotland and the rest of the UK, with an estimated 10-20 billion barrels still remaining.
I was in Aberdeen last month and saw first-hand the work of the Oil and Gas Authority which we established to be a strong, independent regulator focused on maximising economic recovery.
"The sector continues to have the full support of the UK government, confidence is returning, and today's announcement recognises there are great opportunities for further exploration."
(LM/MH)
