GAS company BG Group gave a new lease of life to its North Sea operation yesterday after pledging to increase production.

The former British Gas group said its strategy would push back the expected point of production decline in the North Sea beyond 2007.

The plans emerged as BG, which generates about half its business from the North Sea, announced a 36 per cent improvement in underlying earnings for the final three months of last year. Despite the impact of a weaker dollar, the figure of £249m helped full-year earnings to rise by 23 per cent to £842m.

Higher prices and volumes in the exploration and production division, particularly following improved performances in Kazakhstan and Egypt, helped the group record strong earnings. Production increased by nine per cent, while the average oil price per barrel rose 56 per cent on a year earlier to $45.58 in the fourth quarter.

Chief executive Frank Chapman said the group would raise its previous projections for growth to the end of the decade and beyond.

Among the changes, BG increased next year's exploration and production target from 530,000 barrels of oil a day to 580,000.

The company said enhancements in the North Sea would enable key fields to increase production. Improvements are also planned for operations in India, Egypt and Trinidad