Norway currently pumps over 1.6 million barrels of oil a day from its offshore operations and is western Europe's largest oil producer and Europe's second-largest gas supplier after Russia.
Norway's largest producer, the state-controlled company Equinor ASA, has said gaining access to oil supplies in Lofoten is essential for the country to maintain production levels.
It is thought there are up to 3 billion barrels of oil beneath the seabed off the Lofoten archipelago, potentially 5% of the country's offshore oil and gas reserves. The area had already been kept off limits for years by Norway's coalition government through various political deals.
Karl Eirik Schjott-Pedersen, head of the Norwegian Oil and Gas Association told Bloomberg the industry was surprised and disappointed by the move.
Norway's biggest oil union, Industri Energi, which has been a long-time ally of Labour, has attacked the party's new stance on drilling in Lofoten, which comes less than two years after an internal party compromise on the issue.
Unions have highlighted the economic risks of winding down the oil and gas sector - it employs 170,000 and is the country's top source of income, projected by the government to produce 17% of gross domestic product this year.
The move comes days after Norway's government gave the go-ahead on Friday for its $1 trillion oil fund – the world's largest sovereign wealth fund – to invest in renewable energy projects not listed on stock markets. Billions are expected to be spent on wind and solar power projects.
The fund already bans investment in companies that produce only fossil fuels, although it still invests in others such as BP and Shell which have significant renewable operations.
Another sign of the hardening opposition towards fossil fuels, particularly among young people, is a lack of qualified recruits to replace a rapidly ageing oil and gas workforce, according to a recent Reuters report.
Equinor expects about half of its 21,000-strong workforce to retire in the next decade, yet the number of applications for petroleum geosciences and engineering programme at the Norwegian University of Science and Technology (NTNU) in Trondheim, the country's leading programme, fell to 33 in 2018 from 420 in 2013.