"As part of a tripartite agreement, Shell Canada is immediately withdrawing plans to explore for natural gas in the Klappan by relinquishing its tenures," the province said in a release.
"In addition, the Province of British Columbia will not issue future petroleum and natural-gas tenure in the area."
A four-year ban on oil and gas exploration in the area was set to expire Tuesday.
Shannon McPhail, the executive director of the Skeena Watershed Conservation Coalition, says announcement is a welcome relief.
"There are no words to even describe how we're feeling about this right now," she told CBC News. "This has been a long road of 10 years of working on this and I think it has been a huge victory."
The moratorium has prevented Shell Canada from doing exploratory drilling in the area, which is home to the headwaters of three salmon-bearing rivers: the Skeena, Nass and Stikine.