More power price rises flagged in Rio gas play

An independent industry analyst says Northern Territorians may face more power cost hikes if gas is diverted to the Rio Tinto alumina refinery on the Gove peninsula.

The Territory and Federal governments are in negotiations with the mining giant about supplying gas and building a pipeline to the refinery.

Rio Tinto wants the Federal Government to underwrite the cost of a $900 million gas pipeline to Nhulunbuy, more than 990 kilometres east of Darwin.

The company wants the Territory Government help arrange a supply of gas from the Blacktip gas field in the Bonaparte Basin of the Timor Sea, about 110 kilometres from the northern Australian coast.

The Blacktip field is wholly owned and operated by the Italian company ENI, which has a 25-year contract to supply the Territory's Power and Water Corporation.

Power and Water provides power generation, transmission, and electricity retail services throughout the Territory.

The cost of electricity to domestic consumers has already risen by 30 per cent from the start of the year.

Rio Tinto has warned the Gove refinery, operated by its subsidiary Pacific Aluminium, may have to close if a cheaper energy supply can't be secured.

The refinery now generates its power using diesel fuel.

Gas industry analyst Peter Strachan says a new deal to supply gas to Gove could see power costs rise again.

"I think it is inevitable they will go up," he said.

"The costs of developing these fields have probably tripled over the last ten years, and getting $4 a gigajoule gas is a thing of the past." But Mr Strachan says while the deal may be bad news for consumers, it could prove a boon for gas suppliers.

"It means you've got a growing market," he said.

"You've got a very rapidly expanding situation in the Northern Territory, all ...

wanting gas for industry and for power production.

"When the two meet, the prices will rise to attract more gas into that market." Territory Chief Minister Terry Mills, however, says he is determined to prevent power prices from increasing further as a consequence of securing a gas supply for Gove.

He says says the interests of Territory families are his priority in the discussions.

"Make no mistake about that, that is central in my thinking," he said.

"We cannot disadvantage the Northern Territory in these negotiations.

"I don't want any result to occur that increases the cost of electricity for Territorians.

"I am there to protect the interests of Territorians." Mr Mills has already said he feels he is being held to ransom in the talks with Rio Tinto, because the town of Nhulunbuy is almost totally dependent on the operations of the refinery.

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