* Cost rise, tax hike squeezes margins
* Frontier projects, small developments at risk
* Oil prices seen coming down
* Investment growth to stop, then fall (Adds company comments in 8th paragraph)
By Henrik Stolen, Gwladys Fouche and Joachim Dagenborg
OSLO, Jan 16 (Reuters) - Delays to flagship Arctic projectsdue to sharply higher costs and taxes, and lower oil prices,will hamper Norway's efforts to revive oil output stuck at a25-year low, officials and companies say.
The development of several smaller fields, which often flyunder the radar, is also either delayed or in doubt, theNorwegian Petroleum Directorate (NPD) told Reuters.
Cost in Norway's oil sector have roughly doubled between2005 and 2012 and a tax hike unveiled last year pushed severalprojects over the edge just as oil firms around the globeincreased efforts to reduce spending to save cash for dividends.
Norway expects oil investments to grow just 2 percent thisyear and next, a big drop from a decade of double-digit growthrates. It also cut its oil output forecast for theyear.
"The problem is that we (as an industry) are too expensiveand make too little profit," Mads Andersen, the Norwegiancountry chief of oil services firm Cameron said.
Statoil delayed some of its biggest projects, likethe $15.5 billion Johan Castberg in the Barents Sea and itsbiggest find in decades, the Johan Sverdrup field with up to 2.9billion barrels of oil.
The NPD said that Shell's Linnorm field in theNorwegian Sea, expected to pump about 100,000 barrels of oilequivalents per day, was delayed - with no new date for itsdevelopment. There was also a risk Statoil would delay plans forits 50-million-barrel Trestakk project this year.
Wintershall, a unit of BASF, has also delayed itsMaria development and it was uncertain if RWE wouldsubmit its plan for its Zidane project in the Norwegian Sea,despite the company's June target, the NPD told Reuters. Bothfirms, however, said they were aiming to submit plans in 2014.
"Pretty much all of the projects in the Barents Sea are indanger and I'm reasonably sure that all of the gas projects inthe Barents Sea will be put on hold for many years," analystJohn Olaisen at equities brokerage ABG Sundal Collier said.
"The reason for this is a combination of gas prices, costsand lack of infrastructure in the Barents Sea," he said. "Idon't think these projects are gone forever, they will just beput on hold for some years."
Just this week Norway increased its undiscovered resourceestimate for the Barents sea by 33 percent to 8 billion ofbarrels of oil equivalents.
But work in the Barents Sea and the Norwegian Sea will takelonger to take off because firms are struggling to make a profitand need to build expensive infrastructure, more readilyavailable in the more developed North Sea.
OIL PRICE AND EARNINGS
Brent crude spot prices averaged between $108 barreland $112 per barrel over the second half of 2013 but theInternational Energy Agency expects it to weaken to $105 thisyear and $102 in 2015 as Libya, Iraq and Iran increase supplies.
"I think most people who make oil price forecasts see loweroil prices going forward than they thought a year ago," saidIvar Aasheim, Statoil's head of field development in Norway."This leads to a bit more careful approach."
"Now it's all about reducing costs, increasing reserves andworking with the government," he said.
The expected decline in prices is not big, but given therapid cost increase, it would quickly squeeze margins, a problemas many of top oil firms, like Shell, Statoil and ENI have negative cash flows after dividend payments.
Analysts expect European oil firms to report a 20-percentyear-on-year drop in fourth-quarter earnings, Thomson Reutersdata shows.
"We are now seeing delays even on some of the mostprofitable projects," said oil sector analyst Trond Omdal atArctic Securities in Oslo. "Oil companies are now taking asecond look at most of their planned projects."
Unions said that Norway's oil sector was paying the pricefor growing too fast.
"You have had an investment rate of over 200 billion crownsa year and it is not sustainable," Leif Sande, the head ofIndustri Energi said.
"We don't have enough qualified workers for that level ofactivity. There are lots of new rigs coming in now and they haveno idea how to find enough people to put on them." (Writing by Balazs Koranyi, editing by William Hardy)
