Who gets Alaska’s natural gas?

If you’ve been looking for a sign as to where Alaska will ship its latest bonanza — a mother lode of natural gas — it came yesterday, when ConocoPhillips CEO Jim Mulva announced that his company was reviewing its plans to work with BP on a $32 billion pipeline project. Translation: the winds are blowing to Asia, specifically China, and away from the Lower 48. Why is this important? Because it could transform China’s future energy appetites — for the better.

The backstory is this: ConocoPhillips and BP have the gas equivalent of 6 billion barrels of oil stranded on Alaska’s North Slope. The oil flow from the north is dropping, and now Mulva and BP CEO Robert Dudley — and the whole state of Alaska, whose population relies on annual dividend checks from their hydrocarbon bounty — need to figure out how to make up for the revenue loss by getting that gas to people who will buy it.

There have been two options: piping the gas to the Lower 48, or to a West Coast port, from which it would be shipped to Asia in the form of liquefied natural gas. ConocoPhillips and BP’s project — a $32 billion, 1,700-mile pipeline called Denali that would carry the gas to Alberta, Canada, from which it would continue on to Chicago — would have done the former.

Speaking to reporters in Houston, Mulva said two things: First, he’s reassessing the Denali project. Second, he‘s shutting in already-producing gas wells in the United States, waiting for prices — which are currently in the gutter — to rise to profitable levels. “We’d rather keep it in the ground for when it will have greater financial impact,” Mulva told Bloomberg.

Now, you tell me: If Mulva is shutting in U.S. wells, are there any appreciable odds favoring the construction of Denali to the United States? Let’s deconstruct the industry jargon:

                Reassess

Conventional dictionary: Think anew; reconsider.

Oil dictionary: Get the heck out of Dodge.

The Conoco-BP pipeline isn’t the only Alaska gas project on offer. Exxon Mobil and Trans-Canada are also in the game, and hedging their bets by proposing two options: a similar pipeline to the Lower 48, and an 800-mile, $20 billion line to an as-yet-unbuilt LNG terminal in the West Coast port of Valdez (yes that Valdez). In the latter case, the gas would be liquefied and loaded aboard ships from Valdez to Asia and elsewhere.

The Exxon-TransCanada team stopped accepting bids at the end of July, and BP-Conoco’s bid deadline is next week. The announcement of a winner probably won’t come before the end of the year or even early in 2011 because of the required negotiations with ostensible shippers, according to the federal official in charge.

Of course, both teams could decide to punt for now, and return to the question in a few years — the current gas glut is that intimidating. But if there is a decision to proceed, look for the Valdez option to win. Forbes‘ Christopher Helman explains the already-growing Chinese appetite for gas here. Injecting an Alaskan gas supply route to Asia’s fast-growing mega-economy could have huge consequences. Just as demand creates supply, the inverse is also true: The growing global glut of natural gas seems headed toward a tipping point in which China and other big energy users massively embrace the fuel, and use far less dirty coal than expected.