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Released July 25, 2013 | PERTH, AUSTRALIA
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Researched by Industrial Info Resources (Perth, Australia)--The future of the Gove alumina refinery in Australia's Northern Territory is again in doubt, as relevant parties quarrel over who should pay for the required 500-kilometre (310-mile) pipeline.
The refinery and bauxite mine on the Gove Peninsula, 650 kilometres (400 miles) east of Darwin, is owned by Pacific Aluminium, a subsidiary of Rio Tinto Limited (NYSE:RIO) (Melbourne, Australia). It has been losing more than $185 million (AUD$200 million) per year in recent years, largely due to the high cost of operating diesel generators to power their energy-intensive refinery.
The Gove operations, consisting of both a refinery and an open pit bauxite mine, produce about 8.2 million tonnes per year of bauxite and 2.6 million tonnes per year of alumina, and it is considered one of Rio Tinto's worst-performing assets. Pacific has said that it is considering closing the refinery and downsizing to only mining bauxite, if a cheaper energy source cannot be sourced.
A closure of the refinery is something the Northern Territory government is keen to avoid. The nearby town of Nhulunbuy is supplied with basic services by the plant, and nearly 40% of the 4,600 residents are directly employed by Pacific Aluminium. Between lost tax revenue and costs associated with the support of the town of Nhulunbuy, the Northern Territory is looking at revenue losses of approximately $370 million (AUD$400 million) per year, if the refinery were to close.
In February 2013, the Northern Territory's government committed to a 10-year deal in which it will give up its own supply of gas in order to keep the refinery open. In return, Pacific Aluminium Chief Executive Sandeep Biswas assured the government that the private sector would fund the construction. Australia's biggest pipeline company, APA Group Limited (ASX:APA) (Sydney, Australia), is now in talks with Pacific Aluminium to build and operate the pipeline, but they don't want to pay for construction.
"We'll get involved with owning or operating, but Pacific Aluminium controls the project, and they're arranging to have the pipeline built," APA Managing Director Mick McCormack said during a recent investors' call.
According to APA, pipeline-building costs are normally recouped through a margin on the sale of gas over a period of about 30 years, which is standard for long-term supply contracts in the Australian gas industry. However, Pacific Aluminium has only secured a 10-year supply of gas, and Rio Tinto already has announced its intentions to sell the underperforming plant, further increasing the uncertainty.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The refinery and bauxite mine on the Gove Peninsula, 650 kilometres (400 miles) east of Darwin, is owned by Pacific Aluminium, a subsidiary of Rio Tinto Limited (NYSE:RIO) (Melbourne, Australia). It has been losing more than $185 million (AUD$200 million) per year in recent years, largely due to the high cost of operating diesel generators to power their energy-intensive refinery.
The Gove operations, consisting of both a refinery and an open pit bauxite mine, produce about 8.2 million tonnes per year of bauxite and 2.6 million tonnes per year of alumina, and it is considered one of Rio Tinto's worst-performing assets. Pacific has said that it is considering closing the refinery and downsizing to only mining bauxite, if a cheaper energy source cannot be sourced.
A closure of the refinery is something the Northern Territory government is keen to avoid. The nearby town of Nhulunbuy is supplied with basic services by the plant, and nearly 40% of the 4,600 residents are directly employed by Pacific Aluminium. Between lost tax revenue and costs associated with the support of the town of Nhulunbuy, the Northern Territory is looking at revenue losses of approximately $370 million (AUD$400 million) per year, if the refinery were to close.
In February 2013, the Northern Territory's government committed to a 10-year deal in which it will give up its own supply of gas in order to keep the refinery open. In return, Pacific Aluminium Chief Executive Sandeep Biswas assured the government that the private sector would fund the construction. Australia's biggest pipeline company, APA Group Limited (ASX:APA) (Sydney, Australia), is now in talks with Pacific Aluminium to build and operate the pipeline, but they don't want to pay for construction.
"We'll get involved with owning or operating, but Pacific Aluminium controls the project, and they're arranging to have the pipeline built," APA Managing Director Mick McCormack said during a recent investors' call.
According to APA, pipeline-building costs are normally recouped through a margin on the sale of gas over a period of about 30 years, which is standard for long-term supply contracts in the Australian gas industry. However, Pacific Aluminium has only secured a 10-year supply of gas, and Rio Tinto already has announced its intentions to sell the underperforming plant, further increasing the uncertainty.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
