Norway on Friday rejected oil drilling in ecologically sensitive waters just above the Arctic circle, partly because of worries over a disaster like the Gulf of Mexico oil spill.
Environmentalists and local fishermen oppose such activities around the Lofoten and Vesteraalen islands off northern Norway, an important spawning ground for cod.
The center-left government decided not to allow an environmental impact assessment in the area, which would have been the first step in preparing for exploration.
Environment minister Erik Solheim said an analysis of the Deepwater Horizon blowout in the Gulf of Mexico last year influenced the decision.
"The chances for such an accident are small, but the consequences would be enormous," he said. In addition to the fishing resources he was concerned about the large seabird population in Lofoten.
The decision was criticized by the oil industry, which is pushing for new areas to explore as production drops from Norway's North Sea oil fields. Experts say the area around Lofoten could contain as much as 3.4 billion barrels of oil.
"We are very dissatisfied," said Gro Braekken, managing director of the Norwegian Oil Industry Association. She said Lofoten is "the most interesting area and where production can be started at the fastest pace."
Prime Minister Jens Stoltenberg said the government will open for oil activities in waters further north, in the southern part of the Barents Sea close to the Russian border. Norway and Russia agreed a year ago on a joint border in the long-disputed area. Stoltenberg said an environmental impact assessment could be made in the area once Russian lawmaker ratify the agreement.
Braekken welcomed the decision regarding the Barents Sea but said it will take much longer to start production in that remote Arctic area, than around Lofoten, which is closer to existing infrastructure.