Shell-Led LNG Canada Nears Final Decision on Phase 2 Expansion, Sources Say

The consortium behind the LNG Canada project, led by Shell, is approaching a final investment decision (FID) on a major Phase 2 expansion and could grant its approval as early as October, three people familiar with the matter told Reuters. The decision would effectively double the export capacity of Canada's first large-scale liquefied natural gas (LNG) terminal.

Scope of the Expansion

The proposed second phase would add 14 million metric tons per annum (mtpa) of LNG export capacity to the facility in Kitimat, British Columbia. This would bring the project's total potential output to 28 mtpa.

In a statement to Reuters, LNG Canada said, "We hope to make an investment decision before the end of the year." The company noted that any decision is subject to the project's joint venture partners independently meeting their own commercial, regulatory, and governance requirements. Shell added that any decision would weigh factors like "competitiveness and affordability, government support and stakeholder needs."

Market Drivers and Strategic Position

The potential expansion comes amid heightened global demand for energy security, particularly from buyers in Asia. Market participants are seeking to diversify supply sources in response to geopolitical instability, including conflict in the Middle East and shipping disruptions in the Red Sea.

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LNG Canada's location on the Pacific Coast provides a significant logistical advantage, offering shorter and more direct shipping routes to key Asian markets compared to rival exporters on the U.S. Gulf Coast. The move to sanction new capacity also aligns with strong long-term demand growth projections as nations seek to replace coal with cleaner-burning natural gas.

Project Background

The first phase of LNG Canada, a C$40 billion project, began shipping its initial cargoes earlier this year and is designed to produce 14 mtpa from two processing units, known as trains. The project is a joint venture between Shell, Malaysia’s Petronas, PetroChina, Mitsubishi Corp., and Korea Gas Corp (KOGAS).

The project has also secured significant local backing. Earlier this year, MNT Investments LP, a coalition of five neighboring First Nations, signed an agreement giving it the option to invest up to C$1 billion in the Phase 2 expansion, marking one of the largest Indigenous investment opportunities in Canadian energy infrastructure.