Under a 1981 treaty, Norway has the right to farm into a licence CNOOC, a Chinese oil firm, has signed to explore for oil in the waters between Iceland and Norway's Jan Mayen, a tiny volcanic island in middle of the Arctic Ocean.
"We expect an answer from the Norwegian authorities in the last week of November," said Gudni Johannesson, director-general of Iceland's National Energy Authority, told Reuters. "It has been a quite normal administrative process," she said.
"Iceland has offered a license to CNOOC and Eykon; the decision over whether Norway will participate in this is still pending in the Ministry," Ole Berthelsen, a spokesman for Norway's oil ministry, confirmed.
Norway's new Conservative-led government is seeking to mend the relationship with China, which has made it difficult for Norwegian businesses, with Norwegian salmon exporters, for example, finding shipments to China frequently held up at customs.
Iceland awarded the exploration licence to CNOOC and the Icelandic firm Eykon Energy in June, the first time a Chinese company has been awarded a licence to search for oil in the Arctic.
The Arctic could hold some 90 billion barrels of oil equivalent according to the US Geological Survey.