* UK gives green-light to new development
* Project to add 40,000 boepd to UK production from 2015
By Sarah Young
LONDON, Dec 17 (Reuters) - South Korean-owned Dana Petroleum said it will invest $1.6 billion in a new oil project off the coast of Britain, another step towards reviving flagging North Sea oil production.
Britain’s oil and gas production, once a boon for now stretched public finances, peaked in 1999 and slumped 18 percent last year, appearing to fulfil gloomy predictions of an accelerated decline after a shock tax hike the same year.
More recently the government, under pressure to stimulate growth, has been back-pedalling and introduced a series of tax breaks to revive the industry.
Dana, a London-listed company until late 2010 when it was taken over by Korea National Oil Company in a $2.9 billion deal, said on Monday the government’s small field allowance scheme had helped it decide to proceed with its $1.6 billion Western Isles development project.
This follows Canada’s Talisman Energy announcing in October that it will invest $2.55 billion in a North Sea project, in direct response to Britain launching a tax allowance for older fields a month before.
Older fields, smaller fields and heavy oil fields, a type of oil which is more costly to develop, are among the projects which have been helped by this year’s tax breaks.
Dana’s new project, which was given the green light by British authorities on Monday, will develop the Harris and Barra oil fields and will add 40,000 barrels of oil equivalent (boepd) to Britain’s output when it comes onstream in 2015, Dana said.
Cieco, partly owned by Japanese trading company Itochu Corp , is Dana’s partner in the Western Isles project.
A study published in December forecast that British oil output from the North Sea would rise in the next few years, reflecting the impact of more investment, high prices and the new tax breaks.
An increase in oil production could provide a boost for a British government struggling to revive its economy. The dramatic fall in output in 2011 shaved at least half a percentage point off UK growth.
Recent merger and acquisition activity has been another positive area for the region, as oil companies such as China’s top refiner Sinopec Corp, Kuwait’s state oil firm and Japanese trading company Mitsui bought stakes in North Sea projects. (Reporting by Sarah Young; Editing by Elaine Hardcastle)