PERTH (miningweekly.com) – Federal Resources Minister Gary Gray has urged the Northern Territory government to reconsider its stance on providing less gas to mining giant Rio Tinto’s Gove aluminium refinery.

Last week, the Northern Territory Chief Minister Adam Giles announced that it would revise a gas supply agreement to Gove.

Under the original March agreement with Rio Tinto subsidiary Pacific Aluminium, the Northern Territory government would have supplied some 300 petajoules (PJ) of gas over a 12-year period.

However, Giles last week said that the gas deal, which was subject to a due diligence, contained “unacceptable risk” to the Northern Territory economy and its taxpayers, which would have faced a A$3.2-billion gas pricing risk. He also flagged the possibility of energy shortages in the long run.

Instead, the state government is now proposing to sell Pacific Aluminium 13 PJ of gas a year, over a 15-year period, for a total of 195 PJ.

“The alternative proposal gives longer-term certainty to the Gove community while protecting Territory taxpayers from billions of dollars in financial risk,” Giles said.

Gray said on Wednesday that the federal government’s support for the Gove project had not changed, and it was continuing with its due diligence on a loan guarantee to support financing of a pipeline to Gove.

“However, the Northern Territory government decision to dump the original deal has placed the future of the Pacific Aluminium refinery at risk,” Gray said.

He noted that the announcement that the gas supply would be cut from 300 PJ to 195 PJ would mean that the federal government would need to consider the changed arrangements in its due diligence.

“As part of any solution, the commonwealth will require assurances from Pacific Aluminium that the alumina refiner will remain open for the long term,” Gray said.

Faced with high operating costs and market pressures, Rio Tinto has threatened to close the refinery if it could not find natural gas sources to replace diesel at the plant.

After agreeing the gas deal with the state government in February, Rio Tinto announced that it would continue to operate the Gove refinery, which employs 1 100 people.