* 2013 oil output seen at 538 mln barrels vs 561 mln in 2012
* 2013 oil output less than half of peak in 2000
* Slow, gradual recovery will start in 2014
* Gas production also seen dipping after record 2012
By Gwladys Fouche
STAVANGER, Norway, Jan 11 Oil production in Norway, the world's eighth-biggest exporter, will fall to a 25-year low in 2013 and an anticipated slow recovery in subsequent years is threatened by rising costs and bottlenecks, energy authorities said.
Production will fall to its lowest level since 1988 as fields, particularly in the mature North Sea, become depleted and a slew of new developments need more time to come onstream, the Norwegian Petroleum Directorate (NPD) said on Friday.
Still, record investments, big discoveries, high oil prices and a decisive move into Arctic waters support the industry's optimism, underpinning expectations that production will start to recover starting as soon as 2014, the NPD said.
"Not long ago we were talking about the industry's sunset," NPD chief Bente Nyland told a news conference. "Things have changed fast... there is now enormous optimism."
Output will dip to 538 million barrels in 2013 from last year's 561 million before rising slowly year after year through 2017, the NPD forecast.
Gas production from Norway, the world's second-biggest gas piped exporter, will also slip, falling to 106.5 billion cubic metres from last year's record high 114.8 billion.
Still, the NPD lifted its estimate for undiscovered resources to 16.3 billion barrels of oil equivalent from 15.4 billion and hinted at a further rise once new areas in the Arctic are opened to exploration, possibly as soon as this year.
"The increase in the resource estimate and major new discoveries show that the Norwegian shelf still has some surprise left, and that there is good reason for continued optimism," Nyland said.
Oil production peaked at 1.1 billion barrels in 2000 and fell sharply in the years since but finds such as the giant Johan Sverdrup in the North Sea, and Havis and Skrugard in the Arctic, have revived hopes.
The NPD raised its very conservative estimate on Sverdrup on Friday, putting its basis estimate at 1.9 billion barrels, above the previous 1.8 billion projection.
Although this is more conservative that the operators' 1.7-3.3 billion barrel forecasts, analysts said the NPD was generally cautious.
"They are conservative early on and there are still more appraisal wells to be drilled," Thina Saltvedt, an oil analyst in Nordea Markets said.
To boost output further, Norway is opening more of its waters to exploration, planning to sell 86 licences later this year, mostly in the pristine waters of the Arctic.
But development may not be smooth sailing as capacity constraints create bottlenecks and energy companies drilled many fewer wells in 2012 than planned because they could not access rigs.
"There are signs the Norwegian industry is overheating, with the service sector at peak capacity and costs increasing year-on-year," consulting firm Wood Mackenzie said.
"Project delays and overspend will be a common feature on the shelf, as companies struggle to access rigs and equipment on time or in budget."
NPD's Nyland also warned that inflation threatens to push costs too high and some companies may avoid drilling because the increased recovery will no longer cover the cost.
"There are high drilling costs and we need to do something to get the costs down," Nyland said.
"There are a number of new rigs coming into the shelf and we hope that some of them will be used for drilling production wells on existing fields; Statoil has taken some action with the Cat B and Cat D new rigs that are tailor-made for doing drilling on existing production."
Norway's top oil and gas operators include Statoil, Royal Dutch Shell, BP, ConocoPhillips, Lundin Petroleum and Det Norske.