The move is another blow for the UK North Sea industry which has seen the likes of US group Chevron and Norway's Statoil put multi-billion pound projects on hold amid rising costs.
Centrica chief executive Sam Laidlaw said there had been "rising unit costs in the North Sea".
He added: "Upstream, we will continue to drive efficiencies and will be increasingly selective in our investments, focusing on the projects that offer the best returns and the lowest political risk."
Mr Laidlaw warned last year that the UK North Sea is becoming more expensive due to ageing infrastructure and declining field sizes at a time when other basins are becoming more attractive.
He said yesterday: "Moving forward, against a backdrop of challenging economics upstream, particularly in the UK North Sea, we will be increasingly selective in our investments, directing capital towards the projects offering the most attractive returns with the lowest political risk."
He added: "With rising costs, in the UK in particular, we are targeting savings to keep unit lifting and other cash production costs flat over the next three years.
"Against this backdrop, we are being increasingly selective in our investment, concentrating on the most attractive opportunities.
"An increasing proportion is expected to be directed towards North America, where we are well placed to benefit from any increase in gas prices."
The company aims to spend £900 million a year over the next three years on gas and oil projects, 20% lower than previously expected.
Mr Laidlaw said this would have a "limited impact" on production in the near term, which he expects to be between 80 and 85 (million barrels of oil equivalent) a year.
He added: "Our current level of committed capital expenditure in the short to medium term gives us flexibility to consider acquisition opportunities, if the economics are attractive and the assets provide a good fit with our existing portfolio, while potentially divesting non-core assets for value."
Addressing potential purchases, finance director Nick Luff said Centrica was "constantly talking to all major gas suppliers in the world".
Centrica had previously sought to boost its presence in the North Sea as part of a drive to expand its upstream operations.
It snapped up Aberdeen-based Venture Production in a £1.3 billion deal in 2009 and as recently as 2012 bought seven fields in the North Sea in a £246m deal with French oil giant Total.
It has since started selling interests regarded as non-core, including disposing of three packages of North Sea assets towards the end of last year.
Centrica took £318m of post-tax exceptional impairments relating to UK Southern North Sea projects and Canadian gas assets during 2013, financial results revealed yesterday.
In January consultancy Wood Mackenzie reported that capital investment in the UK oil and gas industry last year reached the highest level in real terms since the mid-1970s.
But it warned that a driver had been increased costs and the investment boom experienced by the industry since 2011 is expected to drop off from next year.
The loss of customers coupled with high costs for wholesale gas and transmitting energy led to a 2% drop in Centrica's 2013 adjusted operating profit to £2.7bn, in line with analysts' expectations. Profits at its retail arm British Gas, of which Scottish Gas is a part, fell 6% to £1bn.
Britain's biggest energy supplier lost 362,000 residential customers in 2013, up 60% from 2012, after raising prices just after Labour Party leader Ed Miliband said he would freeze prices if elected.