LNG Canada FID locks in 28 mtpa Phase 2 at Kitimat

The Shell-led LNG Canada consortium took a final investment decision on Tuesday to add two processing units at its Kitimat, British Columbia, terminal, doubling export capacity to roughly 28 million tonnes per year from the 14 mtpa Phase 1 base. Ottawa values the private investment at $32 billion.

Prime Minister Mark Carney and Natural Resources Minister Tim Hodgson attended the announcement in Vancouver. Carney framed the pace of approval as the test for major-project execution across Canada.

"Twelve months from referral to final investment decision is the pace that this pivotal moment in Canada's history demands," Carney said.

Hodgson said the federal Major Projects Office gave LNG Canada a single point of contact and coordinated the multiple federal authorizations the partners needed before committing capital. The expansion was among the first five proposals the office referred for accelerated review last year.

LNG Canada chief executive Chris Cooper said the Kitimat plant would rank among the biggest LNG facilities anywhere and push Canada toward the top five exporting nations.

How competitive is Kitimat against the U.S. Gulf Coast?

Shell executives conceded the construction-cost gap with the U.S. Gulf Coast but argued the value chain offsets it. Cederic Cremers, Shell's integrated gas president, anchored the economics to Montney tight-gas production that straddles the Alberta–B.C. border.

"Construction costs are relatively higher in Canada, but the shipping distances are much shorter. That's two positives to one negative. It's very competitive," Cremers said.

The economics therefore hinge on Montney wellhead costs and on shipping days saved versus Gulf Coast cargoes to Japan, South Korea and India. Phase 1 began commercial shipments to Asia in 2025.

Does 28 mtpa change Canada's leverage with Asian buyers?

Energy economist Peter Tertzakian has argued that Canada gains real negotiating leverage — the ability to redirect cargoes and set contract terms — only around 50 mtpa of combined export capacity. The Phase 1 base of about 14 mtpa, paired with Woodfibre LNG and Cedar LNG, would lift combined Canadian output toward only 20 million tonnes a year. Approving Phase 2 narrows the gap but does not close it.

Reaching the 50 mtpa threshold requires the Phase 2 expansion to deliver on schedule and the proposed Ksi Lisims floating LNG project to reach FID. The Prince Rupert Gas Transmission pipeline is already in early construction to feed Ksi Lisims.

Analyst Robert J. Johnston, writing in The Hub, has framed the principal risk as domestic rather than foreign:

"The bottom line is that, notwithstanding the magnitude of the Power of Siberia project, it shouldn't fundamentally change the economics of Canadian LNG development. The major risk is still internal, not external," Johnston argued.

A stumble over Indigenous consultation, methane regulations, or the oil and gas emissions cap would weigh more heavily on the outlook than manoeuvring between Moscow and Beijing, according to that assessment.

Where does Phase 2 sit in the broader project pipeline?

• Project: LNG Canada Phase 2, Kitimat, B.C.
• Capacity added: Two processing units, lifting nameplate to ~28 mtpa
• Investment: $32 billion (Ottawa estimate)
• Feedgas: Montney formation, Alberta–B.C.
• FID trigger: Tuesday, 29 September 2026
• Status: Sanctioned; not yet in construction execution phase

The decision lands as Carney courts foreign capital more broadly. At his Canada Investment Summit earlier in September in Toronto, the prime minister pitched roughly $1 trillion in new investment to global financiers.

Energy for a Secure Future calculated that the expanded Kitimat terminal will move the equivalent of a third of the volumes that normally transited the Strait of Hormuz before the Iran war. The timing coincides with Middle East fighting disrupting Qatari cargoes.

What to watch next

The watch items are execution milestones and parallel project decisions. Construction sequencing at Kitimat — site preparation, module fabrication, marine works — will determine whether Phase 2 holds its schedule against the cost headwinds Shell acknowledged. On the policy side, the federal Major Projects Office's handling of the next tranche of referrals will signal whether the 12-month review window becomes standard practice. On the supply side, the next Ksi Lisims FID and the pace of Prince Rupert Gas Transmission pipe-laying will determine whether Canada crosses the 50 mtpa threshold that Tertzakian identifies as the point of meaningful export leverage.