By Yereth Rosen

ANCHORAGE (Reuters) - Oil major BP (BP.L: Quote, Profile, Research) has given final approval to spend $1.5 billion (752 million pounds) to develop the Liberty oil field in the Beaufort Sea off the northern coast of Alaska, BP officials said on Monday.

The development will allow BP to tap the estimated 100 million barrels of recoverable reserves at Liberty. First production from the field is expected in early 2011, according to BP's development plan filed with federal regulators.

Separately, Parker Drilling (PKD.N: Quote, Profile, Research) announced it had been awarded a contract to build the drilling rig BP will use at Liberty.

Liberty, which was discovered in 1997, will become the first oil field entirely in U.S. federal waters in Alaska when it starts production. BP officials have previously said peak production would reach 40,000 barrels per day.

The BP announcement came on the same day as a symbolic move by U.S. President George W. Bush to lift one of the barriers to more offshore drilling in U.S. federal waters. The area of the Beaufort where Liberty is located is not subject to the ban being lifted by Bush.

Liberty development is a significant step toward increasing domestic energy sources, BP Exploration (Alaska) Inc President Doug Suttles told reporters at an Anchorage briefing.

"This is a source of new production, albeit modest, but this is how we get there, and it is secure domestic production," he said.

BP struggled for years to come up with a cost-effective development solution for the field. A proposal to build an artificial island with stand-alone production facilities, a common practice for other offshore fields in the Beaufort Sea, was considered but dropped after costs jumped on a similar development at the nearby Northstar field.