Sydney (Platts)--11Feb2013/745 am EST/1245 GMT

The government of Australia's Northern Territory has agreed to release enough gas to keep Rio Tinto's Gove aluminum refinery open for the next ten years, Chief Minister Terry Mills said in a statement Monday.

Gove, which is the Northern Territory's largest private employer, is operated by Rio Tinto subsidiary Pacific Aluminium. The company has been conducting a strategic review of the high-cost alumina refinery, and is expected to release a decision on its future shortly.

Rio Tinto has said securing a long-term gas supply was critical for the continuing operations of the refinery. The operation currently runs on high-cost heavy fuel oil.

The government's decision, following last-ditch talks with Rio Tinto CEO Sam Walsh and local gas resource holder Eni, is subject to a commitment from Rio Tinto that the Gove alumina refinery would continue operating. It is also conditional on Eni confirming the details of its guarantee to supply gas to Northern Territory utility Power and Water Corporation until 2026.

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Once those conditions were met, the government would direct PWC to release the agreed 300 petajoules of gas to Rio Tinto. The gas would be released over a period of 10 years.

"The Northern Territory government has now guaranteed a gas supply for the Gove refinery, and it is now up to Rio Tinto to make a commitment to keep the operation open," Mills said. A spokeswoman said the government was optimistic that Rio Tinto would commit to continuing operations at Gove, which can produce more than 8.2 million mt/year of bauxite and 2.65 million mt/year of alumina.

Mills said the Australian government had shown its commitment to the Northern Territory's decision by announcing it would underwrite the financing of a gas pipeline to Gove.

The chief minister visited the federal capital Canberra last week, where he signed a memorandum of understanding with the Commonwealth government. That agreement "seeks to increase energy security and economic development by encouraging onshore and offshore gas exploration and development," he said.

"During my talks, I also highlighted the need to plan for the long-term energy needs of the Northern Territory and Australia by establishing a national pipeline grid, connecting energy supplies from the Territory to the eastern seaboard and the existing national pipeline grid," Mills added.

--Christine Forster, christine_forster@platts.com
--Edited by Wendy Wells, wendy_wells@platts.com

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