Adds Santos comments in paragraphs 9-12

By Christine Chen

SYDNEY, May 20 (Reuters) - Santos' STO.AX A$3.6 billion ($2.32 billion) Narrabri gas project in Australia can proceed, a tribunal ruled, as boosting domestic energy supply outweighed concerns the development would hurt the climate and damage Indigenous heritage sites.

The decision follows a decade-long fight over the grant of leases for Santos to drill up to 850 wells and extract coal-seam gas in northwest New South Wales (NSW), an area that overlaps with the culturally significant Pilliga forest.

The local Gomeroi people have opposed the development, arguing the project's emissions would worsen climate change, impacting their health, way of life and the land.

In a judgment released on Monday, the National Native Title Tribunal acknowledged the project's contribution to climate change was a "serious detriment", but said energy security was also an "important benefit" for the public as well as the Gomeroi people.

"Weighing the public interest evidence, including the evidence addressing environmental matters, the panel has found the project offers a net public benefit," the tribunal’s decision said.

Since the Narrabri gas project was proposed over a decade ago, it has been opposed by the Gomeroi people, who said they were owed exclusive native title rights over the area. Native title is a legal doctrine in Australia that recognises Indigenous rights and interests in certain parcels of land.

Santos initially won the tribunal's approval for the grant of the leases in 2022. The Federal Court overturned the decision in 2024 and ordered a reassessment of the Gomeroi people's environmental concerns.

The tribunal said on Monday the leases could be granted provided the gas produced was used exclusively for domestic supply and additional cultural and environmental safeguards were implemented.

Santos said in a statement the decision was an "important step forward" for its project.

"Narrabri gas will be lower-cost gas for NSW customers compared to gas imported from interstate or overseas, and that’s why this project is so important for NSW manufacturers, businesses, electricity generators and households," it said.

The company still needs planning approval for a pipeline connection to Australia's east coast and has previously said it would make a final investment decision by this year.

Santos said it would continue to engage with the Gomeroi people to protect their heritage and ensure they benefitted from the project.

NTSCorp, which represented the Gomeroi traditional owners in the case, did not respond to a request for comment.

($1 = 1.5521 Australian dollars)

(Reporting by Christine Chen; Editing by Jamie Freed and Sonali Paul)

((christine.chen@thomsonreuters.com; +61 2 9171 7119;))