Shell Canada Energy has taken a final investment decision on phase two of the LNG Canada project in Kitimat, British Columbia, a move that will double the facility's liquefaction capacity to 28 million tonnes per annum (mtpa).

The sanction adds two liquefaction trains to the existing Kitimat site. Shell holds a 40% interest in the joint venture and expects to lift nearly 6 mtpa of additional LNG from the expansion. Commercial operations at the expanded facility are slated to begin in the early 2030s.

Beyond the new trains, the scope includes an LNG storage tank, a condensate tank, a loading berth, and expanded utility and process systems, all within the existing terminal footprint on the BC coast.

Upstream of the terminal, TC Energy's Coastal GasLink will expand throughput on its 670 km pipeline — the sole feedgas supply line to LNG Canada — by building five new compressor stations.

Partners and lifting structure

LNG Canada operates under an equity lifting arrangement: each joint venture participant takes its proportionate share of LNG output and is responsible for securing gas supply for that share. Ownership is split among Shell (40%), Petronas (25%), PetroChina Company (15%), Mitsubishi (15%), and Korea Gas (5%). LNG Canada Development operates the facility.

Cederic Cremers, Shell's integrated gas president, framed the sanction in both market and portfolio terms.

"LNG Canada is a core part of our Integrated Gas portfolio, helping to supply LNG to customers in Asia at a time when diversity of energy supplies and energy security are increasingly important," Cremers said.

"Phase 2 supports Shell's strategic objective to be the world's leading integrated gas and LNG business by connecting Canadian resources with Shell's global LNG portfolio, trading capability and customer reach."

Returns and demand case

Shell said the investment fits within its capital allocation framework and should generate double-digit returns, with the project's internal rate of return expected to exceed the hurdle rate for its Integrated Gas business.

The company anchored its demand case in its LNG Outlook 2026, which forecasts global LNG demand rising by more than 60% by 2040 and approximately 65% by 2050. Shell attributes that growth to rising energy demand and the need for secure, flexible and reliable energy supplies — a demand projection, not a market consensus, and one that competing outlooks from other majors and agencies do not all match.

ARC Resources closes

The FID follows Shell's completed acquisition of ARC Resources, a British Columbia- and Alberta-based energy company, after the deal cleared shareholder, court and regulatory approvals. The acquisition strengthens Shell's Montney position, which supplies gas toward its LNG Canada offtake commitments under the equity lifting structure.

For Kitimat, the sanction extends a construction and operations cycle that phase one established on the province's northwest coast. For Asian buyers, it adds a second tranche of Pacific-facing Canadian supply in a decade when competing US Gulf Coast and Qatari expansions will also reach the market.

The watch items now are execution: the pace of train construction at Kitimat, Coastal GasLink's compressor station build-out timeline, and whether the early-2030s startup window holds against a crowded global LNG project queue.