Icelandic authorities said on Wednesday they were considering pumping water onto lava in the event of a potential volcanic eruption that has been looming over the town of Grindavik for several weeks.

Authorities would use the water to cool and divert the flow of lava to protect the fishing port of 4,000 people on Iceland's southern Reykjanes peninsula.

Residents were evacuated on November 11 after magma shifting under the Earth's crust caused hundreds of earthquakes – a warning of a likely volcanic eruption – and thousands of smaller tremors have shaken the region since.

Civil protection authorities and European experts will assess the possibility of "using high volume pumping to cool down the lava to protect the town of Grindavik and important infrastructures," Vidir Reynisson, Iceland's Head of Civil Protection and Emergency Management, told reporters.

The method was used in 1973, when a fissure erupted just 150 metres from the town centre on the island of Heimaey, surprising locals at dawn.

Residents had been able to successfuly slow and control the spread of lava.

"An assessment technical team will arrive in Iceland tonight or tomorrow morning and they will assist us in assessing the possibilities," Reynisson said.

Iceland is home to 33 active volcano systems, the highest number in Europe, and experiences an eruption every four or five years on average.

Grindavik is located near the Svartsengi geothermal plant, the main supplier of electricity and water to 30,000 residents on the Reykjanes peninsula, as well as a freshwater reservoir.

It is also near the Blue Lagoon geothermal spa resort, a popular tourist destination which has closed as a precaution.

Authorities have in recent days been building reinforcements around the Svartsengi plant to protect it in the event of an eruption. (AFP)