Tiwi Islands traditional owners have won a federal court challenge against Santos' $4.7 billion Barossa gas project in the Timor Sea north of Darwin.
Environmental lawyers representing Munupi clan elder Dennis Tipakalippa argued the group was not properly consulted before approval for the project was granted by the federal regulator in February.
After a five day hearing, including a special on-country session where traditional songs and dances were performed as evidence in the case, federal court justice Mordecai Bromberg ruled that the project's approval was invalid.
The ruling means the gas giant has to maintain a pause on work on the project that began after the court challenge was filed.
The Environment Defenders Office had argued the approval granted by the National Offshore Petroleum and Safety Environmental Management Authority (NOPSEMA) was unlawful.
Lawyers for Mr Tipakalippa said Santos had not consulted with the Munupi clan and gave the Tiwi Land Council (TLC) insufficient information about the project.
Elders including Mr Tipakalippa and sea rangers from the Tiwi Islands told the court of their concerns about the project's possible impacts on cultural and spiritual values as well as food sources and the marine environment.
The court ruled the regulator failed to assess whether the company's approval application showed it had consulted with all relevant parties, as required by law.
It also said NOPSEMA did not consider some material in the application that it was required to assess.
'A huge victory'
Environment Defenders Office Special Counsel Alina Leikin said the ruling was a "huge victory for the Munupi Clan and a testament to their strength and dedication in the face of one of the biggest mining companies in the country".
"It will have national and global implications for consultation with First Nations peoples on mining projects," she said.
"Today's decision puts oil and gas companies on notice.
"It sets a new standard about the consultation that companies are required to conduct with First Nations peoples before drilling in the sea."
Senior Munupi traditional owner and lead plaintiff Dennis Tipakalippa told the ABC he was "the happiest man alive".
"I had to stand up, especially with the drilling that was going to go ahead," he said.
"I'm just doing it for my ancestors, and I'm doing it for my future generations, and with this result today, I'm very happy."
Mr Tipakalippa said he would host a big community celebration tonight, featuring a traditional ceremony and dance.
Santos 'disappointed', calls for full court review
In a statement, Santos said the decision was disappointing and damaging for investor confidence in Australia.
"As a result of the decision, the drilling activities will be suspended pending a favourable appeal outcome or the approval of a fresh Environment Plan," the statement read.
"Given the significance of this decision to us, our international joint venture partners and customers, and the industry more broadly, we consider that it should be reviewed by the Full Federal Court on appeal."
The company said it had engaged with the Tiwi Land Council and Northern Land Council about the proposed project, and that NOPSEMA "accepted our efforts to consult with Tiwi Islanders" when it accepted the environmental plan.
The statement said the project is currently 46 per cent complete and there is "headroom" in the cost contingencies for the project.
It finished with a warning to governments.
"Project approval uncertainty is a public policy issue that should be urgently addressed by Australian governments to reduce risk for trade and investment in projects around the country," the statement said.
"Santos appreciates the strong support from our Japanese and Korean joint venture partners, who have, in good faith, and on the back of Australia’s historical reputation as a safe and stable investment destination, invested in this project."
