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NT govt backs plan to save Gove refinery

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February 11 2013, 6:05PM

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.