Royal Gazette has learned.

The smelly find was recently made by contractor RT Environmental Services Inc., which has been conducting an $8,000 environmental study in the area for the Royal Navy.

But Base Commander Robin Bawtree would say almost nothing about the discovery.

"There is no story at all at this stage,'' he said, adding that he did not know if fuel had been stored underground at the Royal Navy Base, which is scheduled to close on March 31.

Strong fumes can be smelled outside a roped-off cave entrance recently opened at the east end of Casemates Prison. "Danger -- Keep Out,'' says a sign on the edge of the hole, which is visible from Pender Road.

Commander Bawtree suggested that the cave in which the fuel was found is not part of the Naval Base. "I don't own any caves at Malabar,'' he said.

"That's not part of my estate.'' The first phase of RT's study, which he said was requested by the Bermuda Government, is completed, he said. When the final report is prepared, underground fuel "is something that may come out in the report or may not''.

As for the phase one report, "it's a document that is privy to the Navy, and it's not available for general perusal at this stage''.

Management and Technology Minister the Hon. Grant Gibbons said he believes the phase one report will be delivered to technical officers at the Environment Ministry "imminently''.

"We are aware that there is a cave up there and it has been discovered having oil in it,'' Dr. Gibbons said. "The Navy has also asked RT to proceed with a phase two study which will...include a fair amount of work in terms of additional discovery and a complete discovery of the cave where oil has been discovered and also will include some recommendations for remediation.'' The amount and composition of the sludge has not been determined. It is believed it has been in the cave for many years. "It still remains to be determined that the Royal Navy was in fact responsible,'' Dr. Gibbons said.

RT is the same company assessing the environment at the US Naval Air Station at St. David's and the US Naval Annex in Southampton.

Oil sludge found at cave in Malabar Contined on Page 1 But at those Bases, RT is working for the Bermuda Government. At Malabar, the Royal Navy is footing the bill for the study. It is understood that Shell Company of Bermuda Ltd. is also paying RT for exploratory work in the area.

RT's project manager at Malabar, vice-president Mr. Peter Uhlman, told The Royal Gazette in January that his company had completed two site inspections at the Base and found it to be "generally in very good shape.'' Mr. Uhlman did not return telephone calls on Monday or Tuesday.

The "non-invasive'' study at the Base was to involve a review of historic activity at the Base and an assessment of whether any of those activities had the potential to pollute, Mr. Uhlman said.

By paying for its own environmental study, the Royal Navy had taken a "proactive'' approach to the Base clean-up, Mr. Uhlman said. It is British Defence Ministry policy to "apply the same (environmental) standards as they do at home,'' he said.

SMELLY FIND -- A contractor has found oily sludge inside this cave opened up at the edge of HMS Malabar. The Royal Navy Base is scheduled to close on March 31.