It will be 37 metres high and 26.5m wide, according to the Norwegian Coastal Administration, and is estimated to cost at least 2.7bn kroner (£250m).
Norway’s transport minister, Ketil Solvik-Olsen, said that sea currents and underwater topography in the country’s south-western coast “result in particularly complex wave conditions”.
Plans for a ship tunnel in Stad had been floated over the years, but now a project with financing was ready, he said.
“We are pleased that the ship tunnel will now become a reality,” Solvik-Olsen said, adding that travel time between Norwegian cities and towns in the area would be reduced.
The tunnel is expected to be located at the narrowest point of the Stadlandet peninsula, where the weather has for decades been considered an obstacle for shipping.
Terje Andreassen, the project manager, said engineers would have to blast out an estimated 8m tonnes of rock to build the tunnel. Construction is expected to start in 2019.
Under the plan, passenger traffic will be given priority but leisure boats and other vessels will also be able to use the tunnel. It will be free for vessels measuring less than 70 metres .
Vessels sailing through the tunnel will get timeslots from a traffic centre to avoid congestion.
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