The National Energy Authority of Iceland, dubbed Orkustofnun, issued licenses to a group of regional oil companies for exploration and production of hydrocarbons in the Dreki area off the northeast coast.
Orkustofnun, in a statement, said it had evaluated the reserve area through coordination with the Ministry of Environment and the Ministry of Fisheries.
"Orkustofnun studied the financial capacity of the parent companies of the applicants in order to ensure that the applicants have sufficient financial strength to conduct the activities for the long-term and can handle the corresponding environmental and safety elements," the agency said.
Iceland's economy was crippled by the global economic crisis that began in 2008. The country produces no oil or natural gas of its own, reports energy reporting website Rigzone.
Faroe Petroleum Norge AS and Valiant Petroleum will serve as individual operators in the exploration and production areas.