"There won't be an impact study" during the current legislative term which ends in 2013, to evaluate the eventual consequences of oil exploration in the area of the archipelago, Prime Minister Jens Stoltenberg told a news conference.

An impact study, aiming to determine the opportunities and challenges for the search and extraction of natural resources, is considered the first step towards opening up an area to exploration.

The government said it would still however collect some information which could be relevent to an eventual impact study in the future, the prime minister said.

Stoltenberg's Labour Party, the lead coalition partner that has long been undecided on the issue, has thus sided with its political allies, the Centre and Socialist Left parties, which are adamantly opposed to all oil activities in the region due to its fragile ecosystem and its importance to the country's fishing and tourism industries.

The government's decision comes as a hard blow to oil companies facing a rapid depletion of their existing North Sea reserves and eager to explore new and untapped areas.

"These maritime areas ... are the most promising for the industry and those where we could launch production the most quickly," Norwegian Oil Industry Association (OLF) head Gro Braekken said.

"We are very unhappy about this new delay," she said in a statement, stressing the region contained some 1.3 billion barrels of oil-equivalent, which amounts to "the Norwegian production for one year," according to Environment Minister Erik Solheim.

State-owned energy giant Statoil meanwhile stressed the government's decision was not a major roadblock for the industry.

"The government's decision is not the one that Statoil and the Norwegian oil and gas industry have argued," chief executive Helge Lund said.

"However, the fact-finding process now being initiated means that, once a decision to carry out an impact assessment has been taken, less time is needed to open up for exploration activity," he said, adding: "That is positive."

Many observers had cautioned that a Labour Party "yes" to an impact study would have plunged the government into deep crisis.

The government however announced that it does intend to open up new zones in the Barents Sea to prospection and to launch an impact study on waters now attributed to Norway after a border deal was signed with Russia. The rightwing opposition parties, which favour opening up Lofoten to oil exploration, stressed that the archipelago was not being placed off limits indefinitely and that the debate could be resumed after the next general elections in 2013.

Norwegian opposition to Arctic oil exploration swelled following the BP Deepwater Horizon accident last year that killed 11 people and caused a massive oil spill in the Gulf of Mexico.

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