* Peak production seen at 55,000 barrels per day
* To start producing in 2017
* Could recover more than 250 mln barrels of oil
OSLO, Dec 21 (Reuters) - Norway's Statoil has decided to go ahead with a $7 billion project to develop the North Sea Mariner oil field discovered 31 years ago, it said on Friday, giving a boost to the UK offshore industry after years of decline.
Statoil said it has now made the investment decision on Mariner, situated 150 kilometres east of the Shetland Islands, and also aims to make a decision on the Bressay heavy oil field in the same area next year.
Mariner, Britain's biggest new offshore oil field project in over a decade, is slated to start production by 2017 and could recover over 250 million barrels with peak production of 55,000 barrels per day, providing much needed tax income for the British government.
The field was discovered in 1981 but other firms left it dormant for decades as development studies concluded that its heavy, viscous oil and low well pressures made development too expensive.
"Others have tried since 1981 but the technology is in our DNA and we draw on our heavy oil experience at Grane field on the Norwegian continental shelf," Lars Christian Bacher, Statoil's executive vice president for international development said.
"Technology is not the same as in 1981 and of course oil prices are also not the same as in 1981," he added.
The Bressay field to the north of Mariner, and which analysts say could produce between 200 million and 300 million barrels, will be next on state-controlled Statoil's agenda in the UK, with a final investment decision to be made next year.
Britain's oil and gas production, long a boon for now dire public finances, peaked in 1999 and fell by 19 percent in 2011, its biggest annual decline, industry lobby Oil and Gas UK said.
Industry players feared that a tax hike last year would discourage investments and lead to a further decline but high oil prices and some new government concessions on taxes, as well as big new finds on the Norwegian side of the North Sea revived investor interest.
"The approval of Mariner can in part be attributed to recent close engagement with the Treasury and the resulting tax changes aimed at boosting investment in a range of difficult fields including heavy oil projects," Oil and Gas UK said.
A study published in December forecast that British oil output would rise in the next few years and in the past two months, two other projects, Dana's $1.6 billion investment in the Western Isles, and Talisman's $2.55 billion Montrose redevelopment have both been given the go-ahead.
Mariner is the second decades-old project Statoil has revived in two days.
On Thursday, it approved spending $5.4 billion on its Dagny field in Norway, which was first discovered in 1974.
Mariner, consisting of two shallow reservoirs, is expected to create more than 700 long-term full-time jobs and could operate for 30 years, Statoil said.
Statoil holds 65.11 percent of the project, JX Nippon Exploration and Production has 28.89 percent and Alba Resources, a unit of Cairn Energy 6 percent.