(Adds judge's ruling, regulator's comment, case details)...

(Adds judge's ruling, regulator's comment, case details)

Australia's Federal Court on Wednesday ruled in favour of an indigenous group's challenge against a drilling permit for Santos Ltd's (STO) Barossa gas development, throwing the future of the $3.6 billion project into doubt.

Traditional landowners from the Tiwi Islands led by Dennis Tipakalippa had asked the court in June to overturn drilling approval for the Barossa project near the islands off the northern Australia coastline granted by the industry regulator, the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).

"Mr Tipakalippa has established that NOPSEMA ... failed, in accordance with the Regulations, to assess whether the Drilling EP (environment plan) demonstrated that Santos consulted with each person that it was required by the Regulations to consult with," Judge Mordecai Bromberg said in his ruling.

"The acceptance (or permission) given by NOPSEMA was legally invalid. NOPSEMA's decision to accept the Drilling EP must therefore be set aside," he said.

Santos had no immediate comment. The Environmental Defenders Office, which handled the case for the indigenous landowner, hailed the ruling in a social media post. "Tiwi traditional owner has Dennis Tipakalippa won his landmark case over Santos' approvals to drill precious Tiwi Sea Country," it said.

NOPSEMA said it noted the verdict and was considering the implications of the decision. "It is a matter for Santos to consider what the decision means for the Barossa project," a NOPSEMA spokesperson said in emailed comments.

Tipakalippa, who filed the challenge, said Santos had not properly consulted the traditional owners about the drilling, and told the court that the Barossa project posed a risk to sacred sites and spiritual connection to Sea Country.

Santos, which agreed to suspend drilling for the project pending the court decision, previously said it undertakes consultation with all key stakeholders for all of its projects.

Santos was on track to start producing gas from Barossa in 2025 to feed its Darwin liquefied natural gas (LNG) plant.

The Barossa project is co-owned by operator Santos, South Korean energy company SK E&S and Japan's top power generator JERA, a joint venture between Tokyo Electric Power 9501.T and Chubu Electric Power 9502.T .