The project, known as Goliat, is estimated to cost about 28 billion kroner (3.2 billion euros, 4.2 billion dollars).

The scheme must be approved by Norwegian lawmakers but the government has a comfortable majority in parliament.

"Goliat is the first oil field in the Barents Sea that will be developed. Goliat is the biggest industrial project to ever be undertaken in northern Norway," said Norway's Oil And Energy Minister Terje Riis-Johansen in a statement.

The reserves in the oil field amount to 174 million barrels of oil, which at current prices would be worth 60 billion kroner (6.9 billion euros, 9.25 billion dollars).

Italian energy firm Eni holds a 65-percent stake in the project. The remaining 35 percent is held by Norway's energy giant StatoilHydro.

The project is expected to create 500 new jobs, the Norwegian government said.

Goliat is situated close to the Norway's northern tip, about 70 kilometres (43 miles) from the port of Hammerfest.

A gas field, dubbed Snow White, has been operational in the Barents Sea since 2007, 50 kilometres north-west from Goliat's proposed site.