LNG Canada takes FID on Phase 2, doubling Kitimat output to 28 mtpa

The partners in LNG Canada announced a final investment decision on Sept. 29 to proceed with Phase 2 of their Kitimat, B.C., export facility, lifting nameplate capacity to 28 million tonnes per year from the 14 mtpa baseline of the operating first train.

Ottawa values the private-sector commitment at $32 billion. The expansion will build on the footprint of Phase 1, which began commercial shipments in 2025.

LNG Canada is a joint venture of Shell plc, PetroChina, Malaysia's Petronas, Japan's Mitsubishi Corporation and South Korea's KOGAS.

What does the FID change for Canada's export position?

Chief executive Chris Cooper framed the project in national terms. "This will make LNG Canada one of the largest LNG facilities in the world and it will help move Canada towards becoming one of the world's Top 5 LNG exporting nations," he told a Vancouver news conference.

Prime Minister Mark Carney, whose government referred the project to its new federal projects fast-track office in late 2025, pointed to the timeline. "Twelve months from referral to final investment decision is the pace that this pivotal moment in Canada's history demands," Carney said.

Natural Resources Minister Tim Hodgson, who oversees the projects office, said the agency delivered coordinated permits and one-stop contact. "We gave them one point of contact ... and we provided the solutions they needed to make that investment," Hodgson said in an interview.

How does the gas get to the coast?

TC Energy will nearly double capacity on the 670-kilometre Coastal GasLink pipeline by adding compressor stations and upgrading existing stations. LNG Canada will lead the expansion construction; Coastal GasLink (TSX:TRP) retains ownership, operations and the permit.

Feedgas for the terminal comes from the Montney and Duvernay plays in northeastern B.C. and northwestern Alberta. Output from Phase 1 loads onto specialized carriers for delivery to buyers in Japan, South Korea and China.

What is the global context behind the go-ahead?

Shell CEO Wael Sawan tied the decision to recent volatility in rival supply corridors. "Recent global events have shown that reliable, diverse sources of energy cannot be taken for granted," Sawan said.

He cited Shell's internal outlook that global LNG demand will expand roughly 65% by 2050 as customers prioritize flexible supply. The FID lands as ongoing conflict disrupts Qatari shipments and Ukrainian strikes target Russian export infrastructure.

Ottawa has also signalled a desire to diversify away from its dominant trading partner, the United States.

EY Canada managing partner Lance Mortlock said three conditions had to align. Asian offtake demand had to be confirmed — it was. Canadian proved reserves had to support a multi-decade supply profile — they do. Public-policy momentum under the Carney government had to hold.

"They've got government support, there is the policy support, so 'Let's go for it,'" Mortlock said.

What are the environmental objections?

Phase 1 has flared above permitted levels since commissioning, a pattern the joint venture describes as normal startup behaviour. Community and environmental groups dispute that characterization.

"Expanding malfunctioning LNG Canada is like betting on a concrete canoe at a sailing regatta," said Richard Brooks, climate finance director at Stand.earth.

Nichole Dusyk, who leads the Canada energy transition team at the International Institute for Sustainable Development, questioned the federal rationale.

"LNG Canada Phase 2 is putting Canada's climate goals on the back burner for little public benefit and substantial taxpayer risk," Dusyk said.

B.C. Premier David Eby welcomed the federal backing. "There was a step change in the approach of the federal government to this project when this prime minister came on board," Eby said.

What to watch

Construction sequencing, the timing of the first Phase 2 cargo, and resolution of the Phase 1 flaring exceedances remain the operational markers for the next 18 months. The first phase's commissioning record will also test the federal projects office's appetite to fast-track a third expansion tranche.