* UK awards record North Sea licences
* Talisman to invest $2.6 billion in UK oil platform
* UK trade group sees output decline slowing
By Alex Lawler
LONDON, Oct 25 (Reuters) - Britain's North Sea oil and gas industry, in decline for years, is enjoying a rise in deals, drilling and investment because of tax breaks and high oil prices, boding well for a slowdown in the rate of the fall in output.
Britain on Thursday awarded one of its highest ever number of licences to drill oil and gas wells offshore, and Royal Dutch Shell agreed to buy a package of North Sea assets from Hess Corp for $525 million.
A day earlier, Canada's Talisman Energy said it would invest 1.6 billion pounds ($2.6 billion) in one of its oldest UK North Sea oil platforms, confirming a statement it made in September.
The developments follow tax breaks earlier this year that have provided an incentive for companies to look more favourably at the North Sea. Oil prices well above $100 a barrel - an unthinkable price level just a decade ago - are also helping.
"Lots has been going on to ensure the UK Continental Shelf is attractive to investors," said Sally Hatch, a spokeswoman for Oil and Gas UK, a trade group.
"In terms of production, last year there was a large decline, and we'd certainly expect that to slow with the additional investment announced recently," she said.
"We would expect these announcements to result in extra production in the medium to longer term."
Last year, UK oil output fell more than 17 percent to average 1.04 million barrels per day (bpd), despite a record average Brent price of $111 a barrel. Reversing the downward trend is unlikely after billions of barrels - the bulk of the resource - have been pumped out.
"An improved investment climate will not halt the inevitable decline in oil and gas output as fields come to the end of their lives," said Andrew Moorfield, managing director and head of EMEA energy origination at Scotiabank.
"However, the rate of decline in output will be slowed as new investment will seek to exploit ageing fields and maximise available oil and gas production."
Just a year ago, the outlook for the UK North Sea oil and gas industry was gloomy.
Britain was among the world's top 10 oil producers in the 1990s, but output has declined from a peak of 2.9 million bpd in 1999, when oil prices dipped to $10 a barrel, as the larger and easier-to-tap fields were pumped out.
The government's March 2011 budget in addition raised a tax on oil and gas output to 32 percent from 20 percent, a move greeted with dire predictions by the industry.
But in March 2012 it brought in new tax breaks and gave the industry what it had been lobbying for - rule changes designed to give companies certainty on the tax relief they get when they dismantle old pipelines and platforms.
Research by Deloitte earlier this month said these measures were helping to contribute to a more positive outlook and that drilling activity in the UK this year was on target to overtake the 2011 total.
"The government's efforts to stimulate activity through a series of tax relief schemes are starting to filter through," said Graham Sadler, managing director of Deloitte's Petroleum Services Group.
"Along with a sustained high oil price, smaller and technically challenging fields continue to be a much more attractive investment proposition than might have otherwise been the case," he added.