Northern Territory Chief Minister Terry Mills says he feels he is being held to ransom by mining giant Rio Tinto in talks about supplying the Gove alumina refinery with gas.

The Territory Government is in negotiations with Rio Tinto about securing a gas supply for the operation so the company can move away from expensive diesel power generation.

Rio Tinto is reviewing its refining operations at Gove, more than 990 kilometres east of Darwin, amid what it calls tough market conditions.

Mr Mills says the Government has to make sure it evaluates the risks involved in striking a deal to supply gas.

"Rio are calling the shots here," he said.

"I will not leave the Territory exposed.

"That is the focus of our work, to secure our future, to secure our energy supplies."

The Gove operation is run by a Rio Tinto subsidiary, Pacific Aluminium.

Pacific Aluminium chief executive Sandeep Biswas says the refinery must switch from expensive diesel to gas for power generation to survive.

He says that hinges on two decisions beyond Pacific Aluminium's control: the Territory Government negotiating a long-term gas supply and the Federal Government underwriting the construction of a gas pipeline, estimated to cost about $900 million.

Mr Biswas says failure to secure gas would have major consequences.

"There is a high likelihood, in my view, that we would curtail the refinery operations and switch over to a bauxite only, export only operation," he said.

Rio Tinto is expected to make a decision on the refinery's future at the end of the month.


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