Australia has launched an investigation into an oil rig leak that dumped thousands of barrels of fuel into the Timor Sea over more than two months before being plugged this week.

The government probe will focus on the cause of the leak, the response by rig operator PTTEP Australasia and other officials, and the spill's impact on the environment, Federal Resources Minister Martin Ferguson told reporters in Canberra.

Former environmental department secretary David Borthwick will head the inquiry. An estimated 400 barrels of oil has spilled into the Timor Sea each day since the leak began on Aug. 21.

On Sunday, a fire broke out at the West Atlas rig and Montara wellhead platform as workers were pouring mud into the leaking hole. Officials finally managed to plug the leak and extinguish the fire on Tuesday.

The company, a unit of Thailand's PTT Exploration&Production Plc, says it does not know what sparked the blaze.

The oil slick from the rig, about 250 kilometres off Australia's northwest coast, now stretches across thousands of kilometres of remote ocean.

PTTEP said this week it would co-operate with the inquiry. Borthwick's report is due in April.