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It was a big event in Fairbanks, in the middle of Alaska, when they built the Trans-Alaskan Pipeline System.

"Growing up in the 1970s, it was like the Wild West there," says Susan Bell, commissioner in the Alaska state government's commerce department, of her hometown.

The pipeline, which carries oil across the state to the south coast, was an essential part of Alaska's oil boom, making it possible to deliver crude to world markets all year round.

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The growth of Alaska's oil industry, led by companies now owned by BP and ExxonMobil , helped break the power of Opec, the oil-producing countries' cartel, and laid the foundations for two decades of low world prices.

Those glory days are long gone now. Alaska's oil production, which peaked at just over two million barrels per day in 1988, was less than a third of that at 563,000 barrels per day last year, and falling.

Sean Parnell, though, wants to bring the good times back. At the heart of the Alaska governor's plan is another pipeline, this time to open up the huge reserves of stranded gas on Alaska's North Slope.

The gas pipeline was an ambition cherished by Sarah Palin, Mr. Parnell's predecessor who stepped down in 2009. Now he is much closer than she was to making it a reality.

Alaska already has significant gas production: the equivalent of about 1.4 million barrels of oil per day, most of it from the northern oil fields. Almost 90 per cent of that gas is just re-injected into the fields, however, because no means are available to deliver it to customers.

For many years, the solution appeared to be a pipeline into Canada, to Alberta, which could link with existing infrastructure for exporting gas to the "lower 48" U.S. states. That idea is, formally, still alive: Exxon and TransCanada , the pipeline company, are still going through the process of securing approvals from the U.S. Federal Energy Regulatory Commission.

However, the North American shale gas boom and the plunge in U.S. natural gas prices have made it very hard to justify the project's estimated cost of about $40-billion (U.S.).

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The alternative favoured by Mr. Parnell, who advised Ms. Palin on this issue when she was governor, is a different pipeline route to the south coast of the state, where it would feed a new liquefaction plant to produce LNG for export. With the expected "alignment" of Exxon, BP, and ConocoPhillips Co. around that plan, it is making progress at last.

The commercial appeal of export to Asia is obvious. LNG is selling in the spot market there for about $15.50 per million British thermal units, compared with a U.S. benchmark of about $2.30. However, many obstacles remain to be overcome.

The cost of the project, including gas processing and the liquefaction plant, has been estimated at $40-billion to $50-billion. To make that investment worthwhile, the gas will need long-term contracts to be sold.

"To do Alaska LNG, you need a big, big, big committed customer," says Neil Beveridge, an analyst at Bernstein Research. "There's only one country in the world that can do that, and that's China."

Dan Sullivan, commissioner for Alaska's department of natural resources, visited Beijing last November, and has been meeting government officials and company executives from China and Japan. He cites "very significant interest" from those countries in buying Alaskan gas, particularly from the point of view of "geopolitical portfolio diversification" of their supplies.

"If they are going to be getting a lot of gas from Russia and Qatar … those countries are going to be looking for other sources of supply," he says.

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China's oil companies have been scouring the globe for LNG supplies as the country's demand for natural gas has surged. Mr. Sullivan's estimate that Alaskan gas can be delivered to Asia for less than $10 per mBTU, roughly a third less than today's spot price, will also look appealing to Asian buyers.

However, no Chinese companies have yet signed contracts to buy U.S. LNG.

Gordon Kwan of Mirae Asset Securities believes they are wary because of fears of widening political opposition to exports from the U.S.

"The U.S. government hasn't sent a clear signal that they want to send cheap U.S. gas to China," he says.

From that point of view, it is better to export from Alaska than from the lower 48, because it does not deprive any U.S. consumers of cheap gas. As Mr. Sullivan puts it: "You aren't making consumers in Ohio compete against consumers in Asia."

Alaska also already has a decades-old track record of exporting LNG to Japan, from ConocoPhillips' Kenai plant on the south coast, which opened in 1969. So far, however, Chinese and Japanese buyers have not made any commitments to buy more Alaskan gas. For China, the position is further complicated by the possibility that it may be able to generate its own boom in gas production, by applying in its huge shale reserves the techniques that have worked so well in the U.S.

Mr. Parnell is trying to force the pace, setting a deadline of the third quarter of this year for the companies to clarify aspects of the LNG plan, including some financial details, and for them to choose between that idea and the older Canada proposal.

In the end, however, the decision on whether his dream becomes a reality will probably be taken not in Juneau, the state capital, nor even in Dallas, Houston or London, but in Beijing.

Additional reporting by Leslie Hook in Beijing

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