NT govt backs plan to save Gove refinery

THE Northern Territory Cabinet has voted to back a gas plan it hopes will be enough to keep an alumina refinery open and save the outback town of Nhulunbuy.

After returning to Darwin on Saturday following a trip to Canberra and Europe, NT Chief Minister Terry Mills took a proposal to his cabinet on Monday that may secure the future of the Gove alumina refinery.

"The Northern Territory government has agreed to release enough gas to keep the Gove aluminium refinery open for the next 10 years," the government said after the meeting.

"Today's decision is subject to a commitment from Rio Tinto assuring the ongoing operation of the Gove alumina refinery, and from Eni confirming details of their guarantee to supply gas to Power and Water Corporation until 2026," it said.

The refinery, run by Rio Tinto Ltd subsidiary Pacific Aluminium, has been making a loss of about $US30 million ($A29.2 million) per month, and an internal review recommended mothballing it.

Such a move could economically devastate the satellite town of Nhulunbuy that services the refinery and bauxite mine, and force many of its 3800 residents to leave.

"I would be wanting a statement from Rio as to what their intent is regarding the operation of the refinery," Mr Mills told reporters.

Pacific Aluminium has said that if the plant was converted to gas from diesel and the NT unconditionally guaranteed 10 years' supply, it would keep the refinery open.

But allocating enough gas to run the refinery could eventually spell shortages for the rest of the Territory, and until now the government has been unwilling to promise Rio Tinto the gas it wants.

Under the new plan the government has dropped earlier demands that any deal to supply the gas to Gove first must involve securing replacement supplies of gas.

Mr Mills reaffirmed his desire to have the NT's gas infrastructure built to link with the eastern seaboard's gas grid.

"Once you have a gas pipeline in place you then have access from others who are exploring in the region to butt into that pipeline," Mr Mills said.

He said the new deal involved challenges and opportunities for the NT.

"There are probably lots of reasons why you wouldn't make such a decision that we have taken today," he said.

"We will make available the gas that is required to keep the Pacific Aluminium operation going," he said.

Mr Mills said the government's decision to go ahead with the plan was good for the people of Nhulunbuy.

"It should provide them with the assurance and certainty they have been seeking," he said.

Chairman of the East Arnhem Futures Alliance, Klaus Helms, said the announcement was great news.

"I am elated with the work the chief minister of the Northern Territory has done," Mr Helms said.

"Word is spreading very rapidly around town to the people, so it is tremendous," he said.

Mr Helms said he doubted Rio Tinto would turn down the proposal.

"They could have stopped this any way along the line if they weren't going to make a deal," he said.

Dave Suter from the Nhulunbuy Chamber of Commerce and Industry also praised the outcome.

"We are really keen for Rio Tinto to agree to the conditions, which is what we want to have happen now," he said.

Mr Suter said the next big question would be what would happen during the two years or so before the gas arrives in the town.

"We are not out of the woods completely," Mr Suter said.

Pacific Aluminium later said Rio Tinto would consider the NT government's proposal.

"Converting the refinery to competitively priced gas is essential to secure its long-term viability," the company said.

Pacific Aluminium chief executive Sandeep Biswas said his company had been working with the Northern Territory government, the federal government and gas suppliers for more than 12 months to try to get gas to Gove.

"Rio Tinto will give full consideration to the Northern Territory government's important gas supply proposal," Mr Biswas said.

In a statement NT Opposition leader Delia Lawrie and the Labor MP for Nhulunbuy Lynne Walker said Mr Mills had backflipped by agreeing to provide gas to Gove.

"Terry Mills has finally grasped what everyone has been telling him for months," Ms Lawrie said.

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