RIO Tinto will keep its unprofitable alumina refinery at Gove in Arnhem Land in operation, paving the way for a $1.2 billion investment and opening up a new future for the Northern Territory's gas industry.
The decision, confirmed by Rio last Wednesday, follows the offer by the NT government on Monday to give up some gas contracted to utility Power and Water Corporation to send to Gove instead.
While that move curtails guaranteed supplies for PWC, hundreds of jobs would have been lost if Rio had suspended output at the plant.
Santos will also supply gas from its Mereenie fields in central Australia.
NT Chief Minister Terry Mills said Rio's decision "signals the beginning of new opportunities for the Northern Territory, with more than 700 new jobs to be created and a significant injection into the Territory economy".
It will require about $500 million of investment in infrastructure upgrades to allow gas supplier Eni to ship gas to the site, $200m by Rio's Pacific Aluminium division to convert its power generators at Gove to run on gas, and about $500m for a new pipeline to the site.
Rio Tinto chief executive Sam Walsh said "an outcome balancing the needs of all stakeholders" had been reached.
Bringing gas to Gove would double the size of the NT gas market, drive investment in exploration and attract new industries to the region.
The plant is one of several aluminium assets Rio hived off last year into Pacific Aluminium, which is a candidate for divestment.
Pacific Aluminium chief executive Sandeep Biswas said there was "still a great deal of work needed to deliver gas to Gove". That includes finalising commercial terms for gas supply, securing financing support from the Federal Government for the new pipeline, getting environmental and land access approvals, and developing detailed plans to convert the refinery.
Federal Resources and Energy Minister Martin Ferguson said the government would now be able to give detailed consideration to backing the new 600km pipeline, to run from Katherine to Gove.
"This process will take some time, but will be completed as quickly as practical," he said.
Pacific Aluminium's bauxite and alumina operation at Gove has 1500 employees and contractors and is the NT's largest private employer.
The decision will save the town of Nhulunbuy on the Gove Peninsula.
The decision to keep the refinery open was "tremendous news", said Klaus Helms from the East Arnhem Regional Futures Alliance.
The plant has been losing money because of high fuel costs, the strong dollar and weak alumina prices. The ability to switch its energy source to gas could support the life of the site for another 40 years, Mr Biswas said.