By Sarah Young
LONDON, March 28 (Reuters) - British Oil major BP isto proceed with a $500 million-plus investment plan in theremote Shetland Islands, another shot in the arm for North Seaoil.
Though North Sea production has fallen by about two thirdssince 2000 and a surprise tax increase in 2011 led to direpredictions about the region's future, industry body Oil & GasUK in February forecast a pick-up in production from 2014,fuelled by a surge in investment.
The new investment by BP could bring a huge add-on projectat its Clair field and will be welcomed by a British governmenteager to slow the decline in North Sea production after dramaticfalls in the past two years undermined attempts to kickstartgrowth.
BP said on Thursday that it will drill at least fiveappraisal wells in the giant Clair field off the west coast ofthe Shetland Islands, north of Scotland, to discover whether itis worth further development.
BP and its Clair partners, fellow oil majors Shell,ConocoPhillips and Chevron, in 2011 said theywere investing 4.5 billion pounds ($6.8 billion) in a secondphase of development for the field, which first started pumpingoil in 2005.
"If successful, the appraisal programme could pave the wayfor a third phase of development at Clair - this is now a realpossibility," BP's North Sea regional president Trevor Garlicksaid in a statement.
Big oil companies have looked beyond the North Sea in recentyears, favouring new oil provinces with more potential, but therich geology of the areas around the Shetland Islands have keptthem hooked.
BP's plan for Clair follows other recent new investments inthe North Sea, including a $7 billion project announced byNorway's Statoil in December and a 1.6 billion pound($2.4 billion) investment by Canada's Talisman Energy two months earlier.
BP, which has the biggest stake in Clair at nearly 29percent, said that it has already started drilling the firstappraisal well and it could complete up to 12 wells over twoyears, depending on the results of the first wells.