Feds come to NT aid on Gove


Federal and Northern Territory governments sign a MOU to secure gas supplies for Rio Tinto's struggling Gove refinery

Feds come to NT aid on Gove
Feds come to NT aid on Gove

May 28, 2013

The Federal and Northern Territory governments have signed a memorandum of understanding (MOU) to secure gas supplies for Rio Tinto's struggling Gove alumina
refinery.

In
mid February the mining
giant decided to keep the facility operating following
the Northern Territory Government's agreement
to offer the refinery 10 years' worth of its domestic gas supply.

Supplied by Italian-based energy company Eni, the gas is sourced from the Blacktip field, off the north-west coast of Australia.

It is piped to Wadeye, about 250 kilometres south-west of Darwin.

At the time, Mills told the ABC the Rio Tinto decision would lead to a $1.2 billion project to supply gas to Gove.

This would comprise about $500 million in infrastructure upgrades to allow Eni to move gas from the Blacktip field to Gove, $200 million for Rio Tinto subsidiary Pacific Aluminium to convert generators to gas operation, and $500 million to construct a gas pipeline.

Rio Tinto
wants the Federal Government to underwrite the pipeline construction.

The mining giant stated in January it would shut down the refinery and bauxite mine which was understood to be losing $US30 million each month (about $200 million in the past 12 months).

As a result, former NT Chief Minister Terry Mills undertook several months of negotiations
with the Commonwealth Government, Rio Tinto, Eni Australia and other gas suppliers to ensure the Gove refinery remains open for business.

The Gove facility is of particular importance to the outback town of Nhulunbuy, which relies on it for employment.

To be viable, the refinery requires almost as much gas
as
currently used by the entire NT; which would result in a domestic gas shortage.

Mills said in February he was prepared to release a volume of gas from Power and Water Corporation’s current contract with Eni for use at the Gove refinery on the condition a replacement supply
could be
found.

But Pacific Aluminium, which runs the plant,
rejected the offer, demanding an unconditional agreement for a 10-year supply of gas from the government despite the probability of a gas shortage.

Negotiations with major international gas suppliers
including Eni, GDF Suez and Santos in Perth and later, in Europe failed to come up with a viable solution.

Effective immediately, the new MOU will provide an "active and co-ordinated approach" to promoting the exploration and timely development of offshore and onshore gas resources.

It will also aim to ensure long term secure gas supply for the Northern Territory, in particular to facilitate the supply of gas for domestic and commercial use for all customers in the NT, including the Gove refinery.

Current NT Chief Minister Adam Giles says the
MOU with the Commonwealth will "reduce the risks" associated with gas supply security in the Northern Territory due to exploration and development not meeting demand.

"[The deal] will also encourage competition between gas suppliers for the benefit of consumers and thus avoid an artificial or distorted gas market within the Northern Territory," Giles says.

"Onshore gas exploration is speeding up and the potential in the Territory is remarkable.

"Gas to Gove will further encourage investors who choose to do business to develop Northern Australia. The Territory needs to be known as a safe, free-market jurisdiction and a place to do business.

"Businesses and government can achieve mutually desirable goals, provided businesses are willing to invest.The MOU focuses on ensuring that gas resources are sustainably developed in the national and community interest."

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