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Low crude price forces oil industry cutbacks in Norway

(Adds oil directorate chief, analyst)

By Joachim Dagenborg

STAVANGER, Norway, Jan 15 (Reuters) - Norway's oil industry will shrink this year and its decline could gather momentum unless crude prices recover, the country's oil directorate said on Thursday.

By the end of 2019, it estimated oil production would fall by 8 percent as low prices hinder new developments and make extractions from mature fields less cost-effective.

"Over a five-year period, we believe that investment will fall by 175 billion crowns ($22.7 billion)," Bente Nyland, the head of the Norwegian Petroleum Directorate (NPD), added.

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"This is due in part to lower investments in producing fields than was presumed last year and in part to project postponements for new field developments."

Brent crude has lost more than half its value since mid-2014 and trades at around $50 per barrel, almost 20 percent below the figure used by the NPD to make its new forecasts.

Norway's oil production averaged 1.51 million barrels per day (mmboe) in 2014 and would fall to 1.39 mmboe by 2019, the NDP estimated.

If Brent does not rise back above $60, output could fall at a faster rate, Nyland said, though production from existing fields would not be cut as most were profitable even at current prices.

Norway has become one of the world's most expensive oil producers and central bank data shows that no new platform-based development sanctioned since mid-2012 would break even at current prices.

Close to a dozen new oil projects were expected to be approved in Norway 2014 and 2015, but just one went ahead last year and now only a handful are expected this year, including from Statoil (Xetra: 675213 - news) , Premier Oil (LSE: PMO.L - news) and BASF unit Wintershall, she said.

Statoil and Shell (LSE: RDSB.L - news) have cancelled or delayed big projects in Norwegian waters while Lundin Petroleum (Other OTC: LNDNF - news) said it would sharply reduce exploration, focusing on projects already under way.

If the price does not rise, further delays are possible at projects including the $5.7 billion upgrade of Statoil's Snorre field and the development of RWE (Xetra: 703712 - news) 's Zidane field, Pareto Securities analyst Trond Omdal said.

Another project that hangs in the balance is Statoil's 600-million barrel Arctic Johan Castberg project, postponed due to high costs, though Nyland said she expected the field would be developed eventually.

Statoil's Johan Sverdrup, the biggest North Sea find in decades with up to 2.9 billion barrels of oil equivalents is not in danger tough as it could break even with oil prices as low as $40-45 per barrel, analysts say.

Norwegian gas production will rise from last year's 109 billion cubic metres to 112.9 billion by 2019, the directorate said.

(Additional reporting by Balazs Koranyi and Stine Jacobsen, editing by Terje Solsvik and John Stonestreet)