North Sea oil and gas production may have passed its peak. But if BP has its way, the steep decline in its U.K. and Norwegian fields will flatten out with daily production stabilizing at some 300,000 barrels of oil equivalent over the next decade. That is about half the Group's North Sea production peak of about five years ago.

The North Sea currently accounts for less than 8 percent of last year's worldwide output for Europe's second-largest oil and gas company, and that proportion is likely to fall as BP expands its global output. BP CEO Tony Hayward said worldwide production -- 3.8 million bpd according to the company's annual report -- should rise this year.

According to BP Magazine, the Group's North Sea fields are likely to yield some 320,000 per day in 2009, down from 350,000 bpd last year, a 9 percent drop. The decline in BP's output -- it has been producing in the North Sea since the 1970s -- will likely outpace the projected overall fall for U.K. output.

One of the first producers of North Sea oil, its fields are among the province's oldest. Industry lobby group Oil and Gas U.K. projects a drop in oil and gas production this year of 5 percent to about 2.5 million bpd.

The North Sea may be dwindling in importance to BP. Alex Kemp, professor of petroleum economics at Aberdeen University, notes that its relatively small fields are not very exciting for an industry giant like BP. But Tom Ellacott, corporate analyst at North Sea specialists Wood Mackenzie Consultants Ltd., takes a slightly different view. He believes that BP's North Sea assets are still a very important part of the company's overall portfolio mix. "They have to remain committed now," he says.

But even small declines in oil and gas output will represent painful revenue losses for the U.K. government, already struggling like other administrations to cover yawning recession-induced budget deficits. U.K. Oil and Gas says corporation taxes paid by North Sea operators amounted to some $21.2 billion, more than a quarter of the total government receipts from corporation taxes.

Whatever its overall significance, BP says it is in the North Sea to stay until it has extracted the lasts drop of oil available. And BP's investment in the area has gone up rather than down. A complete reassessment of the North Sea's potential should mean a new drilling program from 2011.

According to Bernard Looney, the new head of BP's North Sea business: "We are investing more today than we were five years ago, and undertaking a broader range of activities, everything from license acquisition and exploration -- the latter not something necessarily associated with the North Sea today -- to development and production and decommissioning."