Houston (Platts)--16Mar2015/532 pm EDT/2132 GMT

The current wave of low crude oil prices is unlikely to halt proposed projects to export liquefied natural gas from the US, providing they already have long-term supply contracts in place with customers, a veteran analyst and former US Federal Energy Regulatory Commission member said Monday.

However, developers of other proposed LNG export projects that have not already negotiated supply deals with LNG customers are likely to face another obstacle toward getting their projects financed and built as a result of the decrease in prices, Branko Terzic told Platts in an interview.

The recent precipitous drop in global oil prices has led some observers to speculate that proposed projects to export LNG from the US would no longer be economic, but for the US export projects that have already secured all the necessary regulatory approvals and either are, or soon will be, under construction, oil prices are not a consideration, Terzic said.

This is because those projects already have long-term -- 20 years or longer -- LNG supply contracts in place, based on projections of long-term oil prices.

"Those prices have been linked to a market basket of oil prices and so in Asia and Europe when the global price of oil and oil products drops, the price of natural gas delivered drops as well," he said.

"It's really the buyers' and the sellers' opinion as to what long-term price of both oil and natural gas will be that is the basis of contract negotiation," he said.

Customers in LNG-consuming nations and the builders of LNG facilities prefer the certainty of linking natural gas prices to oil prices going into the future because there is no large, well-established and viable gas market yet in Asia, Terzic said.

"Unlike North America where you have thousands of buyers and thousands of sellers, you don't have an Asian hub with a lot of buyers and sellers and a long track record," he said.

Adding: "My opinion is the Asian buyers of liquid natural gas will still be looking at long-term contracts as will the North American sellers of that gas. For the contract in the near future, they will still be indexed to oil prices."

But Terzic added that low oil prices could become problematic for the dozens of proposed LNG export projects they do not already have long-term contracts in place.

"It'll be the next round of facilities that are still in the licensing stage that will be at risk of whether the investment will go ahead of not," he said.

"There are only a limited number of large Asian buyers that are willing and able to sign 20-year, long-term projects to buy large quantities of LNG," he added.

Most observers think the US' share of the global LNG market will be anywhere from 8 Bcf/d to 12 Bcf/d, yet if the capacity of all the proposed LNG export terminals were added up, it would be two or three times that number, he said.

"We have lot more proposals for LNG facilities than the market can actually support," Terzic said.

"It will be first-come, first-served and the first-come will be the first ones that are able to secure contracts. The other ones will probably not go through," he added.

Canada faces a similar situation in its quest to develop an LNG export industry, Terzic said. "Canada has about 15 proposals for LNG facilities coming through British Columbia. None have been fully licensed. Some have said the Canadians are just going to be too late for the market," he said.

However, Michelle Michot Foss, chief energy economist at the Center for Energy Economics at The University of Texas at Austin, warned that low global oil prices could spell trouble for developers of US LNG export projects.

"Considering that developers rolled out projects and proposals hoping to get $10(/MMBtu) or $11 in Europe and $16-18 in Asia-Pacific, low oil prices are obviously a problem. Soft gas markets might be worse," she said in an email Monday.

Gas demand in Europe "seems to be dead," Foss said. "Gas prices are already low. Once past the mild winter they've had they could see $5," she commented.

Meanwhile in Asia, "LNG has been too expensive in any form for some (India coal winning out in any case; Japan trying to find cost reductions) and demand too weak elsewhere (China). Smaller markets may provide some offtake but without the big anchors [it is] hard to see how US LNG fits in," Foss added.