A liquefied natural gas tanker fills up at the LNG Canada facility in Kitimat, B.C., last year. Partners in LNG Canada will spend at least $30-billion to double production at the facility.ETHAN CAIRNS/The Canadian Press
Shell PLC SHEL-N and its partners in the LNG Canada project are banking on decades of rising demand for liquefied natural gas as they proceed with a more than $30-billion expansion of the facility on the B.C. coast.
Wars in Iran and Ukraine have disrupted global gas supplies and driven up prices, but the decision to double the capacity of the plant in Kitimat, B.C., is predicated on a longer-term transition away from more carbon-intensive fossil fuels, LNG Canada chief executive Chris Cooper said on Tuesday.
“You may argue that there’s some uncertainty right now, but if you look at that long-term demand profile and then the long-term outlook, we think we’ll invest through that cycle,” Mr. Cooper said in an interview. “So that element’s there – generating cash flow for decades. That’s the way we look at these projects.”
Shell said LNG Canada Phase 2, which got the green light from its partners on Tuesday, is one of many such plants that will be required in the coming decades. The company said it expects global LNG demand to increase 65 per cent to nearly 700 million tonnes a year by 2050. Mr. Cooper said some estimates are even higher.
A big risk is going over budget on construction, so LNG Canada’s decision to double up on equipment that has been in operation since last year helps lessen that, he said. The partners have already spent $100-million in preparation for Phase 2.
“So you have a really good risk profile on project execution – known location, known partners, known contracts, a known scope in terms of replication, and then a known market with five big institutional investors who fully support us,” he said.
Prime Minister Mark Carney speaks after LNG Canada said it will go ahead with the Phase 2 expansion project at its LNG terminal in Kitimat, B.C., during an announcement in Vancouver, on Tuesday, Sept. 29, 2026. The expansion will double LNG Canada's capacity to 28 million tonnes a year. THE CANADIAN PRESS/Darryl DyckDARRYL DYCK/The Canadian Press
The investment in the facility will increase production to 28 million tonnes of LNG per year, making it one of the largest such export facilities in the world, the partners said.
Prime Minister Mark Carney has championed increasing energy shipments to diversified global markets to reduce the country’s reliance on the United States, which buys the lion’s share of Canada’s oil and gas exports. Projects such as LNG Canada Phase 2 and Alberta’s West Coast oil pipeline proposal are both aimed at bolstering the Canadian economy against U.S. President Donald Trump’s trade war.
Meanwhile, with Russia’s invasion of Ukraine and shipping disruptions through the Strait of Hormuz, energy security has come into sharp focus for current and would-be buyers of Canadian oil and gas in Asia and Europe.
“Today’s investment is being made in a different environment. A more dangerous and divided world, a world where Canada fully values export diversification and the greater sovereignty it confers. A world where speed, reliability and predictability are major competitive advantages,” Mr. Carney said in Vancouver on Tuesday.
LNG Canada Phase 2 is among several West Coast projects moving forward, under construction or planned, including Cedar LNG, Woodfibre LNG and Ksi Lisims LNG.
The LNG Canada expansion was among the early projects referred to the Major Projects Office a year ago to be considered for fast-track approval. The project includes adding two processing trains at the facility in Kitimat, along with new storage and condensate tanks, a new loading berth and expanded utility and process systems.
In July, Gitga’at, Gitxaala, Haisla, Kitselas and Kitsumkalum nations in B.C. agreed to pay up to $1-billion for a majority equity stake in the massive new storage tank, providing the expansion went ahead.
The 670-kilometre Coastal GasLink pipeline, which ships gas to Kitimat from Dawson Creek in northeastern B.C. will be expanded by adding five new compressor stations. Capacity will nearly double from the current 2.1 billion cubic feet a day, TC Energy Corp., the line’s operator, said in a statement.
When construction hits its peak, the project is expected to employ as many as 4,000 workers in Kitimat, and create 2,100 jobs to build the new compressor stations along the pipeline.
Mr. Cooper said construction would be completed “in the early 2030s,” but did not specify which year.
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Shell owns the largest stake in LNG Canada at 40 per cent, followed by Malaysia’s state-owned Petronas (25 per cent), Japan-based Mitsubishi (15 per cent), PetroChina (15 per cent) and South Korea’s Kogas (5 per cent).
Last September, U.S.-based MidOcean Energy acquired a 20-per-cent indirect interest in key Petronas assets in Canada, including natural gas operations in northeast B.C. and the Petronas stake in LNG Canada.
Some of the LNG Canada partners are also seeking to cash out of portions of their interests amid expressions of interest from global private-equity players and others. Mr. Cooper said any such deals would not change the trajectory of the expansion, and could, in fact, improve financial strength among the partners.
Environmental activists say the investment in LNG Canada runs counter to what they predict will be a worldwide transition to fossil-fuel-free energy. They have also criticized the impact on climate as a result of increasing emissions from the expanded facility and from increased drilling activity in northeast B.C. to supply the plant with gas.
“As the rest of the world rapidly scales up clean energy infrastructure, global gas demand destruction is under way. It’s happening regardless of the desires of the Carney government or foreign gas giants,” Richard Brooks, climate finance director of Stand.earth, said in a statement.
However, Energy Minister Tim Hodgson said energy companies from Japan, South Korea, Germany, Poland and elsewhere have expressed to him a strong desire to secure supplies of the fuel.
“When people say it’s not needed, you have to ask yourself: Are they talking to those who make those decisions, because the ones who make those decisions are committing to long-term contracts to buy our LNG,” he said in an interview.