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(Amends title of Mangesh Hirve, paragraph 14)
* UK finance minister set to announce oil tax changes
* Companies putting better quality assets up for sale
* Some 25 bln pounds of projects still need board go-ahead
By Karolin Schaps and Claire Milhench
LONDON, March 17 (Reuters) - Britain's finance minister mustannounce bold oil tax changes in his 2015-16 budget this week toinject new life into the battered North Sea where investment innew projects has fallen and billions of dollars of assets are upfor sale.
Oil and gas companies in the area are facing a perfect stormof record-high investment costs and a slump in global oilprices, which has put their balance sheets under strain.
As a result, more than $7 billion of oil and gas fields arecurrently up for grabs in Britain's North Sea, according to datacompiled by oil and gas consultancy 1Derrick - but closing dealshas proved difficult due to a dearth of buyers.
Many large firms have cut investment in the mature basin asthey see more profitable opportunities in emerging areas such assouth-east Asia and Brazil. Around 25 billion pounds worth ofenergy firm investments in North Sea projects have still to getthe go-ahead from company boards, according to industry groupOil & Gas UK.
While British finance minister, or chancellor, GeorgeOsborne has signalled that the industry can expect new taxrelief measures in Wednesday's budget announcements, it isunclear what form such measures may take.
But a change in the taxation regime, together with the factthat in recent months some cash-strapped firms are puttingstakes in more attractive projects up for sale, could prompt arevival in deals and attract fresh investment to a sector wortharound 5 billion pounds a year to the government's coffers.
"If (tax relief) doesn't happen, investment will start totail off, exploration activity will not increase and there is areal risk of early decommissioning of fields and the associatedinfrastructure," said Julian Small, global head of oil and gastax at advisory firm Deloitte.
Tax experts say the chancellor is likely to announce theintroduction of an investment allowance that will reduce thecapital expenditure tax rate, a proposal the Treasury putforward last autumn.
Some oil executives have also called for a supplementarycharge on oil producers' profits to be cut to 20 percent - thelevel at which it stood between 2006 and 2011 - from 30 percentnow, while others want the charge to be dropped altogether.
"It needs to be looked at as the tax position is hinderingviability," Shell Chief Executive Ben van Beurden said inJanuary.
SLOW PACE OF DEALS
The number of oil wells drilled in the British part of theNorth Sea fell to the lowest level in 15 years last year,according to data from Deloitte's Petroleum Services Group.
At the same time, the number of North Sea oil and gas assetson the market has increased to 41 from 30 a year ago, data from1Derrick shows. That includes some of Total's stake inthe Laggan-Tormore field, Conoco's 24 percent stake inClair and E.ON's North Sea book.
Mid-sized independent EnQuest is also offering astake of 10 to 20 percent in Kraken, the heavy oil field it iscurrently developing. Similarly, Dana Petroleum is reported tobe looking to sell up to 26 percent in its Western Islesdevelopment project.
But deals have been slow to progress, with 21 percent ofassets staying on the market for more than a year in 2014, upfrom 13 percent in 2013, said Mangesh Hirve, managing directorat 1Derrick.
One problem is that although oil prices have stabilised,buying assets is not yet a priority for most companies.
"Portfolio rationalisation is oriented towards survival andrestructuring - buying assets is not part of the discussion,"said Philip Whittaker of the Boston Consulting Group. "And evenif there was appetite, the management bandwidth to get this doneis very limited."
For the older assets, the problem remains one ofdecommissioning costs, said Andrew Moorfield, Europe-based headof origination at Canada's Scotiabank: "Decommissioning is nolonger 20 years away, but in some cases only five years away."
However, when oil prices were higher, there was lessincentive to come to an agreement on price. Now some deals thatwere on hold are starting to move forward, said Neil Leppard, adirector in the energy deals team at PwC.
"It's harder for the sellers to sit back and do nothing -when capital is more restricted, the focus on where you deployit becomes more important to the board," he said. (Editing by Pravin Char)
