Aussie aluminium smelter faces closure
It is variously described as one of the wealthiest towns in Australia, a mining centre and a place for nearby Aboriginal people to get schooling, food and hospital care.
But any day, a decision will be reached that many in the outback centre of Nhulunbuy fear could put all that at risk.
"We will be collateral damage, that is all it is," explains Dave Suter from Nhulunbuy's Chamber of Commerce and Industry. "We will fade off into the distance."
At the centre of his concerns is Rio Tinto's Gove alumina refinery, which the miner runs via its subsidiary, Pacific Aluminium.
The refinery is one of the largest in the world, fed by the massive bauxite reserves in the area, and is the economic lifeblood of Nhulunbuy.
It directly employs about 1200 staff and many more people rely on it. But the operation has huge energy requirements and it is currently run on diesel.
That is an expensive fuel anywhere, but even more so when it needs to be shipped to Nhulunbuy, a dot located on the eastern tip of Arnhem Land, some 640 kilometres from Darwin, that is cut off from road access for months each year.
In the past, the high alumina price and weak Australian dollar made the operation profitable, but with that situation now reversed, the plant has been bleeding A$30 million (NZ$37m) each month.
Rio has for more than a year been trying to sell the refinery, which it bought as part of a bundle of assets during the ill-timed purchase of Alcan in 2007 for US$38 billion.
Pacific Aluminium has hinted that if the plant can be converted to run on natural gas it will keep the operation going, and it wants an unconditional commitment from the Northern Territory government for a gas supply to be guaranteed. So far that has not happened.
Northern Territory chief minister Terry Mills, who took the reins in August after a landslide win, says he is not blinking.
He knows that allocating Rio enough gas could leave a shortfall needed by homes and businesses in the rest of the territory.
"It is not just about Rio, for goodness sake, it is about the Northern Territory and our exposure in the years to come," Mills says.
"Do we trade that secure supply without having that covered to allow this deal to be struck?"
Mills has tried in vain to cut a deal whereby the refinery would be given the 600 petajoules of gas it needs during the next 20 years, but only if additional reserves were secured, so the rest of the territory doesn't suffer shortages.
It is speculative whether these reserves exist though, and it has been decades since a major gas find in the territory was exploited for domestic purposes.
The gas fields Mills hopes hold the key to securing future supply for the territory are the Petrel and Tern fields in the Timor Sea, controlled by joint venture partners GDF Suez and Santos, or the Penguin Deep prospect, controlled by Italian company Eni.
Hopes of persuading those energy giants to come to the party and commit to exploiting those fields have taken Mills first to Perth, then to Canberra and then to Europe, to speak to senior politicians and company officials.
Although the energy companies hold most of the cards, the territory is not without influence.
Mills has made thinly-veiled threats that gas companies would be forced to allocate some of the bounty they take from new discoveries to the territory's domestic supplies if no solution on Gove is reached.
And the stakes are high.
The territory's gas industry is taking off, with Japanese company Inpex last year committing to a US$34b (NZ$41b) project whereby gas is pumped from off the coast at Western Australia and processed at Darwin.
Gove's closure would hurt more than just the residents of Nhulunbuy. Northern Land Council chairman Wali Wunungmurra is warning of dire consequences if the refinery closes and Nhulunbuy shuts down some essential services.
"Without a local hospital, every expectant mother will have to be medically evacuated to Darwin," Wunungmurra says.
"Without a high school, Aboriginal children will not get an education followed by fulltime work and a productive life," he says.
Wunungmurra says 16,000 Aboriginal people live in nearby communities and they also rely on the local supermarket, retailers, social clubs and other services.
The situation is further complicated because even if sufficient gas can be found to supply the territory in years to come, a pipeline will still need to be built to take the gas out to Gove. That pipeline would cost an estimated $900m and Rio has asked the Australian Government to underwrite the project.
So far that commitment hasn't come, with Resources Minister Martin Ferguson instead saying the government would give it careful consideration once a deal has been reached between Rio and the territory.
Everyone in Nhulunbuy is awaiting news from Rio Tinto on whether the refinery will close and the signs are not good.
A strategic review by Pacific Aluminium has recommended the plant be temporarily closed.
Lew Fellows, Western Australia state manager at Patersons Securities, says it is unlikely Rio will keep the refinery open. "You really have to discount away the other issues and look at it from a commercial point of view," he says.
DOLLAR VALUE: Crunching the numbers on getting gas to Gove: Estimated monthly loss from Gove refinery – $30 million. Population of Nhulunbuy – about 3500. Number of people employed by refinery – 1200. Indigenous people who live nearby – 16,000. Amount of gas sought by Rio Tinto over 10 years – 300 petajoules. Estimated cost of pipeline to take gas to Gove – $900m.
The Southland Times