Norway's ruling party backs oil drilling around Arctic islands OSLO (Reuters) - Norway took a major step towards opening up an environmentally sensitive Arctic area to oil and gas exploration when the ruling Labour Party gave the go-ahead on Sunday for an impact study. Exploration in the waters around the Lofoten islands just above the Arctic circle is becoming one of the most contentious issues for parliamentary elections in September. The picturesque area had been off limits because it is home to the world's richest cod stocks, with environmental groups and the tourism industry opposed to any development. The Labour party voted for the study, a precursor to any exploration, but also said it would take another vote in 2015, before actual drilling could begin. Oil is the Norwegian economy's lifeblood - the nation is the world's seventh-biggest oil exporter and western Europe's biggest gas supplier. Its sprawling offshore energy sector continuously needs new areas to explore to halt the decline in production and energy firms have argued that they should be allowed to investigate the Lofoten islands. Norway's oil production will fall to a 25-year low this year as North Sea fields mature. Even a series of recent big finds, like the giant Johan Sverdrup field, which could hold over 3 billion barrels of oil, will only arrest the decline. Waters off Lofoten are estimated to hold 8 percent of Norway's undiscovered oil and gas resources with seismic tests identifying 50 prospects that could hold recoverable reserves or around 1.27 billion barrels of oil equivalent, the petroleum directorate said earlier. With Labour's support, Norway's top three parties now favor exploration in the area, raising the chance that the next government would begin the process. Reporting by Terje Solsvik and Balazs Koranyi; Editing by Erica Billingham