Shell's North Sea Jackdaw gas field has received final regulatory approval.
Approval for the project - one of the biggest in the North Sea for decades - comes as the UK government tries to boost domestic energy output in an effort to shield the UK from the market volatility caused by Russia's invasion of Ukraine.
Business and Energy Secretary Kwasi Kwarteng said: "Jackdaw gas field - originally licensed in 1970 - has today received final regulatory approval.
"We're turbocharging renewables and nuclear, but we are also realistic about our energy needs now.
"Let's source more of the gas we need from British waters to protect energy security."
Shell said it welcomes the decision and that it plans to move ahead with the field's development, adding that it has the potential to produce 6.5% of Britain's gas output "at a time when UK energy security is critically required".
A Shell spokesperson said: “Having initiated Jackdaw a number of years ago, we welcome the consent received today. We plan to move ahead with the project, which has the potential to produce 6.5% of UK gas production at a time when UK energy security is critically required.
Responsibly produced, local gas production plays an essential role in the UK’s transition to net zero, will support thousands of jobs and forms part of Shell’s broader intent to invest £20 to £25billion in the UK, with 75% intended for low and zero-carbon products and services.
"However, as we have repeatedly stated this can only happen with a stable fiscal policy and we continue to look to the government for those assurances.”
Plans for the gas field were initially rejected in October last year on environmental grounds, but Shell submitted an updated proposal to the Offshore Petroleum Regulator for Environment and Decommissioning in March.
The new plan changes the way natural gas will be processed at the Shearwater hub, to which the Jackdaw field will be connected. Rather than removing all naturally-occurring CO2 from the gas offshore, some of it will be taken to the St Fergus terminal, where it will be treated onshore.
It is thought that the gas field has reserves of between 120 million and 250 million barrels of oil equivalent, and Shell plans to start production in the second half of 2025.
Greenpeace, however, said it believes the permit approval could be unlawful and will consider legal action.