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* 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 (Reuters) - Oil production inNorway, the world's eighth-biggest exporter, will fall to a25-year low in 2013 and an anticipated slow recovery insubsequent years is threatened by rising costs and bottlenecks,energy authorities said. Production will fall to its lowest level since 1988 asfields, particularly in the mature North Sea, become depletedand 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 pricesand a decisive move into Arctic waters support the industry'soptimism, underpinning expectations that production will startto 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 havechanged fast... there is now enormous optimism." Output will dip to 538 million barrels in 2013 from lastyear's 561 million before rising slowly year after year through2017, the NPD forecast. Gas production from Norway, the world's second-biggest gaspiped exporter, will also slip, falling to 106.5 billion cubicmetres from last year's record high 114.8 billion. Still, the NPD lifted its estimate for undiscoveredresources to 16.3 billion barrels of oil equivalent from 15.4billion and hinted at a further rise once new areas in theArctic are opened to exploration, possibly as soon as this year. "The increase in the resource estimate and major newdiscoveries show that the Norwegian shelf still has somesurprise left, and that there is good reason for continuedoptimism," Nyland said. BOTTLENECKS Oil production peaked at 1.1 billion barrels in 2000 andfell sharply in the years since but finds such as the giantJohan Sverdrup in the North Sea, and Havis and Skrugard in theArctic, have revived hopes. The NPD raised its very conservative estimate on Sverdrup onFriday, putting its basis estimate at 1.9 billion barrels, abovethe previous 1.8 billion projection. Although this is more conservative that the operators'1.7-3.3 billion barrel forecasts, analysts said the NPD wasgenerally cautious. "They are conservative early on and there are still moreappraisal wells to be drilled," Thina Saltvedt, an oil analystin Nordea Markets said. To boost output further, Norway is opening more of itswaters to exploration, planning to sell 86 licences later thisyear, mostly in the pristine waters of the Arctic. But development may not be smooth sailing as capacityconstraints create bottlenecks and energy companies drilled manyfewer wells in 2012 than planned because they could not accessrigs. "There are signs the Norwegian industry is overheating, withthe service sector at peak capacity and costs increasingyear-on-year," consulting firm Wood Mackenzie said. "Project delays and overspend will be a common feature onthe shelf, as companies struggle to access rigs and equipment ontime or in budget." NPD's Nyland also warned that inflation threatens to pushcosts too high and some companies may avoid drilling because theincreased recovery will no longer cover the cost. "There are high drilling costs and we need to do somethingto get the costs down," Nyland said. "There are a number of new rigs coming into the shelf and wehope that some of them will be used for drilling productionwells on existing fields; Statoil has taken some action with theCat B and Cat D new rigs that are tailor-made for doing drillingon existing production." Norway's top oil and gas operators include Statoil,Royal Dutch Shell, BP, ConocoPhillips,Lundin Petroleum and Det Norske.