LNG Canada Phase 2 Pact Pushes FID Toward Year-End

LNG Canada and the governments of Canada and British Columbia signed an enhanced investment cooperation agreement on May 14, paving a clearer runway to a final investment decision on the Kitimat terminal's Phase 2 expansion by the end of 2026, according to a joint statement from the parties.

The pact follows a separate May 1 vote by the Shell-led joint venture to approve hundreds of millions of dollars in incremental funding for front-end engineering, long-lead procurement and First Nations agreements needed to clear a year-end FID, LNG Canada said. Phase 2 would replicate the existing two-train facility and roughly double nameplate liquefaction capacity to 28 million tonnes per annum (mtpa).

What 28 mtpa Means for Kitimat Gas Flows

Phase 1 first cargo departed Kitimat in late June 2025, marking Canada's debut as an LNG exporter on the Pacific. Phase 1 capacity is 14 mtpa, and adding two more trains of equivalent size would lift total nameplate output to 28 mtpa.

Oil Authority synthesis: at industry-standard conversion of roughly 0.13 bcf/d per million tonnes of liquefaction, the Phase 2 increment would draw an additional 1.8 to 1.9 bcf/d of feedgas at full ramp, lifting Kitimat's combined demand to approximately 3.7 bcf/d. That is comparable to roughly a quarter of current British Columbia marketed natural gas production reported by the BC Energy Regulator, and it would arrive into an Asian LNG market where the front-month Japan-Korea Marker (JKM) traded near $18.92 per million British thermal units (MMBtu) on May 21, up roughly 53% year on year.

The Joint Venture Behind the Decision

The LNG Canada partnership is led by Shell (40%), with PETRONAS (25%), PetroChina (15%), Mitsubishi Corporation (15%) and KOGAS (5%) holding the remaining equity. "This enhanced co-operation brings LNG Canada, its Joint Venture Participants and the Governments of British Columbia and Canada even closer together," CEO Chris Cooper said in the May 14 release.

Federal Energy and Natural Resources Minister Tim Hodgson framed the agreement as a continuation of the momentum from Phase 1's start-up, saying last summer's first cargo "solidified a new era of Canadian energy leadership." Neither Cooper nor Hodgson disclosed dollar figures for the federal or provincial commitments.

Coastal GasLink: The Pipeline Half of the Equation

Phase 2 cannot move without a corresponding capacity build on the Coastal GasLink (CGL) pipeline, which runs from northeastern BC's Montney to Kitimat. TC Energy, which remains the 100% owner and operator of CGL, signed commercial agreements on March 25 placing LNG Canada in the execution-manager role for a potential CGL Phase 2 expansion that would roughly double pipeline throughput. "Doubling the transmission of natural gas through the existing pipeline will help further strengthen Canada's role as a reliable supplier to global LNG markets," TC Energy CEO François Poirier said in the company's statement.

How Phase 2 Stacks Up Against U.S. and Qatari Competition

Hart Energy and LNG Prime both reported in early May that Shell expects to greenlight Phase 2 by year-end, citing Shell's prepared remarks at its Q1 results call. Two independent expert tracks underline the urgency: Wood Mackenzie has flagged the second half of the decade as a window in which U.S. Gulf Coast capacity additions and Qatar's North Field expansion could lock in the bulk of Asian buyer commitments, while Rystad Energy has noted that buyers are seeking diversification away from Strait of Hormuz transit risk after the 2026 disruption. Phase 2 sailing through year-end FID would also push Canada toward a top-five global LNG exporter position once the new trains commission, contingent on construction lead times of roughly four to five years.

Archive context

For context on the regional gas backbone that feeds Kitimat, see Oil Authority's recent coverage of Enbridge's BC pipeline review, which sits adjacent to the same Montney production base that Phase 2 would draw on.