LONDON (Reuters) - Oil production fell more than 17 percent to average 1.04 million barrels per day (bpd) in 2011, government figures released on Thursday showed, underlining the difficulty in slowing down a decade-long fall in output.

Output fell 17.4 percent compared with 2010 to average 52 million tonnes (381.2 million barrels), the Department of Energy and Climate Change (DECC) said in a statement, the lowest level of production since the 1970s.

"This decrease stems from a number of unexpected slowdowns....as well as a general decline in UK production from established fields," the statement said.

Keen to ensure Britain's remaining oil and gas reserves are tapped, the government last week unveiled plans to boost North Sea investment. UK oil output peaked at more than 2.7 million bpd in 1999 and has been on a downward trend since 2000.

As well as the drop in oil output, the DECC figures also showed production of natural gas in 2011 fell even more sharply than oil output, declining by 20.8 percent.

As a result, gross imports of natural gas were greater than gross production for the first time since 1967.

Britain has earned billions of dollars in oil and gas revenue over the last 35 years and the UK's high quality grades of crude oil have become a benchmark used in international trading.

But a number of offshore oil installations underwent unplanned maintenance in 2011, including Nexen's Buzzard field, the UK's largest oilfield, adding to the impact of natural decline in reducing supplies.

With production in the UK past its peak, in recent years larger companies such as BP Plc have been scaling back in the North Sea, selling fields to smaller companies who tap the remaining reserves.

That process has been slowed down, according to industry executives, by uncertainty over the cost of closing old sites.

But Finance Minister George Osborne last week announced steps to resolve the uncertainty, which the industry has welcomed as it could lead to an increase in transactions and investment.

"The proposed removal of uncertainty on decommissioning relief should be positive for the UK North Sea oil and gas industry," said Andrew Moorfield, head of oil and gas at Lloyds Bank, last week.

Osborne also introduced incentives for harder-to-develop fields, such as those in deeper water, including a 3 billion pound ($4.8 billion) tax break to open up development of fields in the frontier region to the west of the Shetland Islands.

(Reporting by Alex Lawler; Editing by Anthony Barker)