Oil and gas firms drilled 34 percent fewer wells in the UK Continental Shelf last year versus 2010, according to an end of year review by Deloitte which blamed economic turbulence and rig shortages for the slowdown.

Operators drilled just 49 wells compared with 74 wells in 2010, on a par with activity levels in 2003 and contrasting sharply to the Netherlands, Denmark and Greenland which saw stable or growing energy exploration.

Norway saw the largest increase of 12 percent compared with 2010. Offshore drilling activity across North West Europe fell 12 percent last year with 122 exploration and appraisal wells spudded, while the pace of new field start ups continued to drop across both the UK and Norway, the report said.

The low activity on the UKCS is not what we would normally expect in a year when the average monthly Brent oil price has remained well above $100 dollars per barrel, however, the downward trend is the result of a number of factors rather than any one single issue, said Graham Sadler, managing director of Deloitte's Petroleum Services Group.

The consultancy pinned the blame on a delayed reaction to the 2008 economic crisis, prevailing economic headwinds, rig shortages and dwindling stocks of North Sea oil and gas.

It said last year's surprise tax hike on energy explorers may begin to be felt from 2012.

Explaining the sharp drop in activity relative to neighbouring countries, Deloitte said offshore exploration in the UK may be more susceptible to economic shocks given the rising number of small- and medium-sized independent explorers active in UK waters.

About one third of UK wells drilled during 2011 were operated by small independent energy explorers, while 39 percent of wells spudded were by medium-sized firms, it said.

Higher oil prices have led to greater investment with an increasing number of development projects granted approval in UK waters last year.

The same trend can be observed in Norway with an increase in the number of development plans granted approval during 2011, Sadler said.

Whether exploration and appraisal drilling activity returns to pre-2011 levels this year remains in doubt as credit becomes more of an issue for independent explorers.

We would however expect to see additional investment coming onstream in the months ahead and a number of field developments pushed forward, Sadler added.

Farm-ins remained the most common type of deal with 53 percent of all activity, while asset acquisitions represented 18 percent, slightly above 2010 figures.

As well as driving investment, the sustained high oil price likely underpinned growth in merger and acquisition activity and asset acquisitions.

Companies had the opportunity to review their portfolios or increase their equity interest in reserves and the oil price may have allowed companies to take larger, more risky deals, Graham Hollis, energy partner at Deloitte in Aberdeen said.

This may also have led to companies buying more producing assets as opposed to exploration assets, Hollis said.

(Reporting by Oleg Vukmanovic; editing by Keiron Henderson)