Iceland is to join the growing rush of countries aiming to tap into the potentially vast oil and gas reserves of the Arctic. Reykjavik is hoping to attract investment from some of the world's biggest oil companies as it finalises the terms for its first offshore licences.

Several British groups and StatoilHydro, of Norway, are among those considering submitting bids in January for about 100 exploration licences. They cover 40,000sqkm of ocean more than 300km northeast of Iceland and south of the Norwegian Jan Mayen islands.

The water depth ranges from 800 metres to about 2,000 metres, according to Thorarinn Arnarsson, hydrocarbon licensing manager at the National Energy Authority in Iceland.

With oil prices reaching $147 per barrel last month, the high costs and technical complexity of operating in such remote regions look increasingly manageable. The retreat of Arctic ice sheets caused by climate change has also made drilling easier.

Kristinn Einarsson, project coordinator at the Energy Authority in Iceland, said that plans for an earlier exploration round in the region had been scrapped in the 1990s because the area was considered too challenging. “We think the technology now exists,” he said, citing drilling projects in waters of up to 3,000 metres in the Gulf of Mexico and off the coast of Brazil.

The new licences will run for up to 16 years and, if they prove successful, would allow for production for 30 years. The region is relatively unexplored, although a joint preliminary study conducted by Norway and Iceland in the 1980s offered evidence of the existence of oil-bearing rocks.

The results of an additional seismic survey carried out this summer will be published at an investor conference in Reykjavik on September 4 and 5. About 100 delegates from oil companies are expected to attend the conference.

The US Geological Survey estimates that there could be 90billion barrels of undiscovered oil in the Arctic, with 80 per cent lying offshore. Greenland, Russia, the United States and Canada are opening up areas that previously were considered too costly to explore.

Charlie Kronick, chief policy adviser for Greenpeace, said that the search for oil in such ecologically sensitive areas was misguided. “The irony is that it is the loss of ice because of climate change that has allowed oil exploration in these regions,” he said.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive