BP PLC (BP, BP.LN ) will spend at least $1 billion to increase its Alaska drilling activity over the next five years, the company said Monday.

The British oil company's new investment could help Alaska stave off declining oil production and increased competition from the lower 48 states, where new drilling techniques have spurred an oil boom in recent years. BP credited its decision to Alaska 's cut in oil taxes, including a 20% reduction in taxes collected for new oil produced.

BP said it plans to spend $1 billion to upgrade existing facilities, increase drilling and well-work activity and add two drilling rigs in the Alaskan North Slope fields over the next five years.

The rigs, expected to be in place starting in 2015, will increase BP's Alaska rig fleet to nine.

BP and its partners will also evaluate whether to spend up to $3 billion for new development projects over the next decade in the wider Prudhoe Bay region, BP said. BP is considering such projects as building new drilling pads and drilling more than 110 new wells, BP said.

Alaska oil production has been in steady decline since the late 1980s. The state slid into fifth place for U.S. oil production in March, falling behind California for the first time in at least three decades.

"Our announcement today should make abundantly clear that BP is committed to being a part of ( Alaska 's oil) future and to continuing to extend the life of North America 's largest oil field," said BP Alaska Region President Janet Weiss.

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