Here's what Lorne said about that:
:
Nate: So it was meant to be on Oddworld though?
Lorne: It was a decision we had to make, we were waiting to say where. On the map, I knew where Fangus was happening. But I also wanted to give the crew a chance; there were a lot of people who were really excited about making their own game. So I gave them the ability to make their own game but they didn’t want to stick with this ‘crazy’ stuff, they wanted to go with some more human designs and I just lost interest. So I said that I was going let this run but if it’s going to be so human, it’s not going to be on Oddworld. What I really wanted to do was have it be on Oddworld but in a different location, where it would have its own mythology on the other side of the world. So… here are problems that happen in Alaska and those are things that take place in the Middle East. They really had nothing to do with one another.
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source:
http://oddworldlibrary.net/oddblog/s..._Lorne_Lanning