* Capex to be $24-$27 billion per year 2014-2020 * Reiterates cash flow forecast * To divest $2-$3 billion of assets per year By Andrew Callus LONDON, Dec 3 BP is raising investment and betting its future on oil over gas, as the slimmed-down British group fights to recover from the U.S. oil spill and Russian rows that have hurt its reputation and share price. The No.4 ranked company among western investor-owned oil and gas groups said it would raise capital spending, excluding acquisitions, to between $24 and $27 billion a year in the years 2014 to 2020 from an estimated $22 billion in 2012 and $19.1 billion in 2011. Next year and in 2014, spending will average between $24 billion and $25 billion, BP told analysts in its first strategy update since striking a series of deals aimed at getting its Russian and U.S. operations back on track. The so-called "upstream" oil and gas production arm of the business that generates the bulk of profits will absorb more of that spending too - 80 percent up from 70 percent at present, further reducing the importance of its refining and marketing, trading and other non-production activities. The extra spend will be financed by higher cashflow from operations and asset sales of between $2 billion and $3 billion a year. The company reaffirmed a target it set at the start of the year to increase operating cash flow by 50 percent by 2014 versus 2011. Like all top investor-owned western oil firms, BP is struggling to increase output and reserves as nations guard their resource wealth jealously, and spending ever more to find and develop new supplies. Unlike its peers though, BP has had some difficult recent years in the United States and Russia - which contribute about half the company's output. In order to pay its dues for the oil spill and refocus its Russian strategy, BP has undergone a massive rearrangement of assets with total completed and planned divestments of $65 billion - about half its total market value. BP's stock market value "discount" to its peers like Royal Dutch/Shell and Exxon Mobil amounts to tens of billions of dollars as a result of its U.S. and Russian issues, analysts believe, but although the divestments were to a large extent forced upon it, Chief Executive Bob Dudley argued that they had also made BP simpler and easier to manage. "We have sold 50 percent of our upstream installations, one third of our wells and half of our pipelines," Dudley said, "yet we have only lost 9 percent of our production and 10 percent of our reserves. That makes us a simpler company." MORE OIL, LESS GAS Dudley also agreed the company was taking a route focused more on oil and less on gas than some of its rivals. BP is set to retreat in the rankings of Liquefied Natural Gas (LNG) producers over the coming years, although in barrels of oil equivalent terms, its oil and gas output levels are about equal to each other. In the United States, and particularly the Gulf of Mexico, BP became a pariah after its 2010 oil spill there. Although BP's U.S. offshore operations are back to pre-spill levels, last month it pleaded guilty to criminal misconduct and added a $4.5 billion penalty to the $23 billion the disaster has cost it. Investors expect the settlement will allow the company to move on, but last week the U.S. government used BP's criminal status to ban it from new federal contracts over its "lack of business integrity." Also last week, BP avoided bidding for Gulf of Mexico leases, raising a new question mark over its plans for a province where it is the main deepwater leaseholder, and which accounted for much of its output growth plans in past strategy announcements. In Monday's presentation, Dudley made clear the Gulf of Mexico was still a core growth area for the company. In Russia, where BP is more heavily invested than rivals, BP has had disagreements with its 50-50 partner in TNK-BP , privately-owned AAR. BP has also pursued new Russian projects with the increasingly dominant state sector in the form of deals with government-owned Rosneft. In October and November, it finally struck a series of deals allowing it to exit TNK-BP, acquire a stake in Rosneft, and begin talks about such projects. Rosneft board member Mikhail Kuzovlev gave a speech at Monday's presentation in which he hailed its $55 billion dollar deals to buy out both BP and AAR as "one of the largest energy transactions in history." Monday's strategy update comes hard on the heels of a Nov. 23 reorganisation of BP's oil and gas production management, reversing a change it enacted after the spill. The move puts Lamar McKay, head of BP's U.S. operations, in charge of the upstream division, freeing up Dudley from close oversight of the day-to-day operations he took over in the wake of the spill, which killed 11 men and spewed millions of barrels of crude into the sea.