Shell-led LNG Canada partners may take Phase 2 FID as early as October

Calgary/Houston/London: Partners in the Shell-led LNG Canada export project could reach a final investment decision on its Phase 2 expansion as early as next month, three people familiar with the matter told Reuters.

The expansion would add a further 14 million metric tons per annum (mtpa) of liquefied natural gas export capacity to the facility in Kitimat, British Columbia, effectively doubling the project's total capacity to 28 mtpa.

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The proposed expansion comes as LNG buyers, particularly in Asia, are placing a growing emphasis on supply security amid conflict in the Middle East, Red Sea shipping disruptions and uncertainty over future flows through the Strait of Hormuz.

Tight global markets, outages among major producers and strong long-term demand growth from countries seeking to replace coal with cleaner-burning natural gas are driving interest in new LNG projects and more diversified sources of supply.

LNG Canada, a joint venture led by Shell and backed by Malaysia's Petronas, PetroChina, Mitsubishi Corp and Korea Gas Corp (KOGAS), is Canada's first large-scale LNG export terminal and one of the country's largest private-sector investments.

The facility is strategically positioned on Canada's Pacific Coast, giving it shorter shipping routes to key Asian markets compared with US Gulf Coast exporters that must transit the Panama Canal.

"We continue to work with the venture partners to explore pathways to a possible Phase 2 expansion. Any decision will consider factors such as competitiveness and affordability, government support and stakeholder needs," Shell said to Reuters in a statement.

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The project's first phase, which cost about C$40 billion, is designed to produce 14 mtpa of LNG from two processing trains. The facility shipped its first cargo earlier this year and is viewed as a cornerstone of Canada's effort to become a major global LNG exporter.

LNG Canada has also secured support from Indigenous communities in the region. Earlier this year, MNT Investments LP, which represents a coalition of five neighboring First Nations, signed an agreement that gives the coalition the option to invest up to C$1 billion in the Phase 2 expansion, one of the largest Indigenous investment opportunities in Canadian energy infrastructure.

"Any potential final investment decision remains subject to LNG Canada's Joint Venture Participants independently satisfying their commercial, fiscal, regulatory and governance requirements," LNG Canada said in a statement. "We hope to make an investment decision before the end of the year."