Nov. 5 (Bloomberg) -- Australia has set up a commission to investigate the country’s third-worst oil spill, after as much as 30,000 barrels leaked into the Timor Sea off the northwestern coast.

David Borthwick, a former Secretary of the Environment Department, will run the inquiry of what happened at the Montara field, Energy Minister Martin Ferguson said in Canberra today. Borthwick, who will have the power to summon witnesses and evidence, must report by the end of April.

Well operator PTT Exploration & Production Pcl stopped the leak Nov. 3 and extinguished a fire that had engulfed the West Atlas drilling rig two days earlier. While the spill has damaged the standing of Australia’s oil and gas industry, it has a strong safety record and there is no need for new exploration proposals to be delayed during the probe, Ferguson said.

“It is vital that we learn from this incident and take any necessary steps to stop similar incidents occurring in the future,” Ferguson said. “Clearly the Montara incident has damaged the standing of the petroleum industry in Australia.” The PTTEP spill is the first accident among 1,500 wells drilled in Australian waters since 1984, he said.

Borthwick, who has the option of holding public hearings, said he has “a full suite of powers.” He is tasked with finding the cause of the incident and assessing the adequacy of the response. The investigation will determine whether any changes are needed to Australian laws on oil and gas exploration and production, Ferguson said.

Fully Cooperate

PTTEP will fully cooperate with the inquiry and welcomes the opportunity for all the facts to be placed on the public record and assessed, it said in an e-mailed statement today.

The Bangkok-based company hasn’t given an explanation of what caused the leak 2,600 meters (8,500 feet) below the seabed, Ferguson said. “That will be subject to review by the commission,” he told reporters.

Oil from the spill hasn’t reached the coasts of either Australia or Indonesia, Ferguson said. The closest patch of oil is more than 70 kilometers (43 miles) from the West Australian coastline, and more than 230 kilometers from the Indonesian coast, he said.

No new oil is leaking into the environment and no more dispersants to break it up are being used, Ferguson said. Containment and recovery operations are continuing, he said.

Worst Spills

PTTEP has estimated that as much 400 barrels a day of oil may have leaked between Aug. 21 and Nov. 3, potentially totaling about 4,140 tons. That would make it Australia’s largest spill from an oilfield and the third-worst overall.

Australia’s most-severe recorded oil disaster was when the tanker Kirki lost its bow off the coast of Western Australia in 1991, leaking about 17,280 tons of light crude into the sea, according to the Australian Maritime Safety Authority’s Web site. The Princess Anne Marie lost 14,800 tons off Western Australia in 1975 after a crack to her hull.

The spill was “an extremely rare event,” David Knox, chief executive officer of Santos Ltd., Australia’s third-largest oil and gas producer, told reporters in Sydney today. “While it’s highly regrettable, the industry has the capability and the wherewithal to address the issues” and operate safely in the future. “It’s very important we find out what happened here.”

Fisherman, Seaweed Farmers

The Australian Greens party said evidence in the inquiry should be heard in public. “We are concerned that the inquiry as announced could happen entirely behind closed doors,” marine spokeswoman Senator Rachel Siewert said today. Borthwick should also investigate the spill’s impact on Indonesian waters and the claims of fisherman and seaweed farmers who say their livelihoods have been affected, she said in a statement.

The National Offshore Petroleum Safety Authority, the Northern Territory Department of Regional Development, Primary Industry, Fisheries and Resources, and the Department of Environment, Water, Heritage and the Arts are also investigating the spill, Ferguson said.

“We can reasonably assume that it has had a reputational impact,” Belinda Robinson, head of the Australian Petroleum Production & Exploration Association, said in an interview yesterday. “It certainly affects everyone directly or indirectly involved in addressing the incident.”

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; James Paton in Sydney at jpaton4@bloomberg.net

Last Updated: November 5, 2009 01:58 EST