TransCanada Corp. (TRP) Chief Executive Russ Girling said Tuesday that its $41 billion Alaska natural gas pipeline project with Exxon Mobil Corp. (XOM) is still focused on the U.S. market, despite comments by the state's governor last week in favor of liquefied natural gas shipments to Asia.

Girling said indications from natural gas shippers were that they favored shipping gas from Alaska's North Slope overland to the continental U.S., rather than an alternative option that would take gas to the Alaskan port city of Valdez and super-cool it for shipment on tankers over seas.

But the project could be shifted to LNG if the area's major producers -Exxon Mobil, BP Plc (BP) and ConocoPhillips (COP) - prefer.

"If shippers decide that ultimately they want to ship that gas to another market, we will adjust the project accordingly," Girling said during the company's third-quarter earnings conference call.

An oversupply of natural gas in North America due to advancements in shale-gas drilling technology has given birth to several new liquefied natural gas export terminal projects in both the U.S. and Canada, as producers seek to sell their gas to Korea, Japan and China, where demand and prices are higher.

But Girling said the short life of gas wells means natural gas supplies still have to be replenished in the U.S. every five years, meaning there will be a market in the U.S. for Alaska gas by the time the pipeline project is expected to be complete in 2020.

Last week, Alaska Governor Sean Parnell said Asia may be a "better market for Alaska gas" and suggested to TransCanada and the producers that they focus on the LNG option rather than the 1,700-mile pipeline south.

"If market demand for gas has truly shifted away from the Lower 48 [states] to Pacific Rim markets, then the state of Alaska must also be willing to move with that, and we are," Parnell said at an oil and gas industry event in Anchorage on Thursday.

Alaska has provided up to $500 million in subsidies to TransCanada for the pipeline project, as well as a 10-year guaranteed tax rate for producers.

Earlier Tuesday, TransCanada reported it increased adjusted profits by 11% during the third quarter on revenue from new pipeline and energy generation projects.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; edward.welsch@dowjones.com

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