UPDATE 1-KazMunaiGas 2011 oil output hit by industrial action
* Crude production falls 7 pct to 12.3 mln tonnes
* Blames decline on summer industrial action
* To increase capex spend for 2012 by 19 pct (Adds detail)
MOSCOW, Jan 9 (Reuters) - KazMunaiGas Exploration Production said its crude oil production fell in 2011 due to industrial action over the summer months, adding that it plans to increase capital expenditure in 2012.
The London-listed arm of Kazakh state oil and gas company KazMunaiGas said it produced 12.3 million tonnes of crude oil in 2011, down 7 pct from 2010.
It said the results were hit by "illegal industrial action" at its Uzenmunaigaz (UMG) unit during May-August 2011.
The company said in December that operations at Uzenmunaigaz were unscathed by violence in the nearby town of Zhanaozen, where the protest by oil workers erupted into rioting in which at least 15 were killed, according to officials.
KMG EP said that in 2012 it would spend about 126.5 billion tenge ($853 million) on capital expenditure, 19 percent more than in 2011.
The increase in capex in part results from the creation of two service companies on the orders of the Kazakh government, employing over 2,000 workers, to boost employment in the region.
KMG EP said it was in discussions with the government and Kazakhstan's sovereign wealth fund "to ensure that shareholder interests are properly taken into consideration" concerning the extra costs related to the ventures.
Shares in the company were down 1 percent at 0729 GMT, having fallen 21 percent over the last 12 months. ($1 = 148.3250 Kazakhstan tenges) (Reporting by John Bowker; Editing by Douglas Busvine and Hans-Juergen Peters)