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* Pushes 2020 production target back by 3-4 years
* Slows Arctic oil exploration
* Plans quarterly dividends, more active share buy-backs
* Follows industry trend of cutting spending
* Shares jump 6 pct to highest in almost 2 years
By Gwladys Fouche and Balazs Koranyi
LONDON/OSLO, Feb 7 (Reuters) - Norway's Statoil abandoned its 2020 production target on Friday and slashedspending plans so it could pay more to shareholders, becomingthe latest oil major to acknowledge the fading appeal of newenergy projects.
Rising investment costs and falling prices have cut thepotential returns on new oil and gas plays, especially moreambitious ones that present greater risks, prompting somecompanies to delay or curtail them.
Statoil has been one of the top spenders, ploughing much ofthe $18 billion it earned since 2010 from selling producingfields, pipelines and its retail chain to fund an aggressiveglobal expansion of exploration and production.
Its wild success in exploration - it found more reservesthan any other conventional energy firm last year - risksbecoming a burden as it now has a plethora of projects tomonetise across every continent.
Statoil is a pioneer in Arctic oil exploration. It has alsospent heavily on U.S. shale assets, leaving it exposed todepressed U.S. gas prices, dragging down its profits last year.
"Given market circumstances we need to find a better balancebetween growth and return that also gives us earlier free cashflow so that we can also service the shareholders," ChiefExecutive Helge Lund told Reuters. "This industry does not havethe best track record in terms of cost discipline."
Lund has made Statoil a global player with big finds inplaces like Brazil, Canada and Tanzania. Now the company aims tospend $5 billion less than planned in the next three years andis pushing back a 2020 target to increase output by a quarter to2023 or 2024 so it can raise dividends and buy back shares.
Statoil shares dropped 3 percent soon after Friday'sannouncement. But, in a sign that investors welcomed Lund'smove, the stock changed course and was up 5.8 percent by 1500GMT, its highest in almost two years. The sector index was up 0.3 percent.
"Statoil becomes the latest European oil major to fall intoline with the market's demands for a better balance betweencapex and production," brokerage Investec said in a note. "Butthe aim to cover capex and dividends in 2016 at $100 per barrelstill looks a stretch on our forecasts."
Investec said its "sell" rating on Statoil shares was underreview.
Other analysts said upside for the stock was limited asStatoil was trading broadly in line with its peers after erasinga sizable discount over the past several months.
"Given Statoil's very mixed history for its guidance, wedoubt the company will get very much bang for the bucks fromthese statements, at least in the short term," Swedbank said.
CASH LEAK
After dividends, several energy majors risk bleeding cashfor years to come until they rein in investment. Majors likeShell, Exxon Mobil and Chevron all reporteddisappointing results so far this year and BP promisedbigger shareholder returns.
The index of European oil stocks has trailed those of othersectors, falling 1 percent over the past year even as thebroader market has gained 17 percent.
With oil prices seen dropping to $105 per barrelthis year and $102 per barrel in 2015, according to theInternational Energy Agency, profit margins are likely to comeunder further pressure. This may force firms to abandon ormothball more projects.
Statoil, Shell and Chevron are specialistsin offshore fields, which are especially capital intensive giventhe complex engineering required to raise crude oil and gas frombeneath the ocean.
Statoil has already delayed some of its biggest investments,such as the $15.5 billion Johan Castberg in the Norwegian Arcticand the $7 billion Bressay in Britain's North Sea waters.
The company's exploration chief told Reuters on Friday thatit would slow its Arctic exploration efforts, one of itspriority areas, to control capital spending. Statoil has Arcticlicences from Greenland to Russia.
Statoil also said it would do less modification of existingfields, slow rig development and cut well development times.
The company said it would introduce quarterly dividendpayments later this year, meaning it would pay one and a halftimes its normal dividend in 2014, and said it would buy backshares "more actively".
"My first impression of the strategy update is positive,"said Kjetil Bakken, an analyst at brokerage Carnegie."Investment guiding is coming down compared to last year and Ithink the market will like that."
To keep projects going, Statoil will bump up investment to$20 billion this year from about $19 billion in 2013 but willkeep that level steady for years.
It is keeping exploration spending little changed, targeting50 wells this year and bringing forward plans to the thirdquarter to explore off Canada, near recent big finds.
