TC Energy and LNG Canada Advance Coastal GasLink Phase 2 With $6 Billion Pipeline FEED Contract Awarded to Tecnicas Reunidas

Kitimat, BC: TC Energy and LNG Canada have taken a concrete step toward doubling Canada's LNG export capacity, awarding front-end engineering and design work for a Coastal GasLink pipeline expansion to Spanish engineering firm Tecnicas Reunidas and signing a new commercial framework that repositions LNG Canada as execution manager for the proposed Phase 2 development.

The proposed expansion would add five compressor stations along the existing 670-kilometre Coastal GasLink route through northern British Columbia, boosting pipeline throughput capacity from approximately 2.1 billion cubic feet per day to up to 5 billion cubic feet per day. Preliminary cost estimates for the pipeline expansion alone stand at approximately $6 billion, with LNG Canada also studying a parallel expansion of its Kitimat terminal from two to four liquefaction trains.

New Commercial Structure

Under the agreement signed in late March 2026, LNG Canada will serve as execution manager for the Phase 2 pipeline expansion, a departure from the original model where TC Energy's Coastal GasLink subsidiary held full construction responsibility. TC Energy will now provide technical advisory services while retaining ownership of the existing pipeline asset. Shell, which holds a 40 percent stake in LNG Canada and serves as the project's lead operator, is driving the restructuring.

The new structure reflects lessons absorbed during Phase 1 construction, which ran significantly over its original $6.6 billion budget, ultimately costing approximately $14.5 billion. By taking direct execution control for Phase 2, LNG Canada's shareholders are seeking to manage costs and contractor interfaces more directly from the outset.

LNG Demand Backdrop

The Phase 2 advancement comes at an opportune moment for Canadian natural gas exports. LNG Canada's two-train Phase 1 facility at Kitimat shipped its first cargo in 2025 and is now running at full capacity near 14 million tonnes per annum. Asian buyers, particularly in Japan, South Korea, and China, have accelerated their pursuit of long-term Canadian supply agreements after disruptions linked to reduced flows through the Strait of Hormuz, which has constrained deliveries from Qatar and other Gulf LNG producers.

Henry Hub natural gas is trading near $3.80 per million British thermal units, providing a favorable feedstock spread against Asian spot LNG prices, which have surged above $15 per million BTU on tight global supply. Canadian LNG has a structural advantage on Asian delivery costs compared with U.S. Gulf Coast projects, owing to the shorter trans-Pacific shipping distance from Kitimat.

FEED Timeline and FID Outlook

Tecnicas Reunidas is conducting FEED work on the compressor station designs for the pipeline expansion, with results expected by mid-2026. A final investment decision on Phase 2, covering both the pipeline and terminal expansion, is targeted for year-end 2026. If sanctioned, construction would begin in 2027, with first LNG from Phase 2 trains targeted for the early 2030s.

The combined capital cost for both the Phase 2 pipeline and terminal expansion is estimated in the range of $20 billion to $25 billion, which would rank among the largest single infrastructure investments ever undertaken in Canada. LNG Canada's shareholder group, which also includes Malaysia's Petronas, Japan's Mitsubishi and CNOOC of China alongside Shell, would need to reach unanimous agreement on the FID before construction proceeds.

Indigenous Partnerships and Regulatory Path

Coastal GasLink reached agreements with 20 elected First Nations band councils along the Phase 1 pipeline corridor, and those partnership structures will inform Phase 2 discussions. However, any compressor station sites outside the existing approved right-of-way will require new Crown consultation processes under British Columbia and federal law.

A Phase 2 expansion would also likely trigger a new environmental assessment under the BC Environmental Assessment Act, a process that typically requires two to three years. LNG Canada has said it is engaging with provincial and federal regulators now to scope the assessment requirements and identify any potential process overlaps with existing Phase 1 approvals that could reduce timelines.

Canada's Position in Global LNG

With Phase 1 operational and Phase 2 in FEED, Canada is on track to become a top-five global LNG supplier by the mid-2030s. Rival expansions in the United States face their own permitting and financing timelines, giving Canadian projects a window to secure long-term offtake contracts with Asian utilities and importers that are actively diversifying away from Middle Eastern supply.

A positive year-end 2026 FID would validate years of difficult permitting, cost overruns, and policy uncertainty, and would cement Kitimat as one of the world's premier LNG export hubs for the next several decades. TC Energy stands to benefit through long-term pipeline tariff revenues from the expanded Coastal GasLink system, regardless of the terminal construction outcome.