The Northern Territory Government says it will provide gas for the Rio Tinto-owned alumina refinery at Gove, east of Darwin, provided a number of key conditions are met.
Rio Tinto has previously said it may have to close the refinery if it cannot replace its expensive diesel supply with cheaper gas.
Under the Government's proposal, 10 years of gas would be released from the Power and Water Corporationâs current contract with Eni.
But the Chief Minister, Terry Mills, says the deal will only happen if a replacement gas supply can be found first.
"The ball is now in the court of Rio and Eni," he said.
"We are prepared to co-operate, we are prepared to play our part, however at the end of the day it's a commercial decision of Rio and Eni." The Chief Minister also wants Rio Tinto to extend its January 31 deadline and continue to operate while a replacement source of gas is found.
The Commonwealth Government will also need to approve a gas pipeline to Gove before the deal can be approved.