Shell and partners approve LNG Canada Phase 2 expansion

Overview

Updated 7 days ago

Twelve months after the federal government referred the project to its new Major Projects Office, Shell and four partners approved a C$33 billion expansion of Canada's only large LNG export terminal. The decision doubles the Kitimat plant to 28 million tonnes a year and unlocks a parallel expansion of the 670-kilometre Coastal GasLink pipeline. Construction begins in early 2027.

Prime Minister Mark Carney called it the second-largest single private investment in Canadian history, positioning the country among the world's top five LNG exporters. Analysts at the Institute for Energy Economics and Financial Analysis counter that a coming global supply glut and rising construction costs could erode the economics. Meanwhile, Fluor and JGC won the $15-billion engineering and construction contract, and the pipeline expansion will source nearly 15,000 tonnes of steel from Canadian suppliers.

Why it matters

The green light doubles Canada's only large LNG export terminal, betting global gas demand will justify billions in new infrastructure.

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Key Indicators

28 million tonnes a year

Capacity after Phase 2

Doubled from 14 million tonnes once the two new trains come online in the early 2030s.

C$33 billion

Phase 2 investment

Total project cost per the Canadian government. Includes engineering, construction, pipeline expansionand financing.

4,000+

Direct construction jobs

Phase 2 is expected to create more than 4,000 jobs during the build phase.

$15 billion

EPC contract value

Fluor and JGC split the engineering, procurement and construction contract evenly.

C$1 billion

First Nations equity option

Five Nations can buy a majority stake in the new storage tank, among the largest Indigenous ownership positions in Canadian infrastructure.

C$50 billion+

Projected government revenue

Estimated direct spend, taxes, royalties and related revenue over the life of Phase 2, per LNG Canada.

Voices

Curated perspectives — historical figures and your fellow readers.

Ever wondered what historical figures would say about today's headlines?

People Involved

Chris Cooper

Chief Executive Officer, LNG Canada

Announced the Phase 2 final investment decision

Mark Carney

Prime Minister of Canada

Welcomed the Phase 2 decision at a Vancouver event

Mark Kalegha

Energy finance analyst, IEEFA

Warned about Phase 2 economic risks in a report

Organizations Involved

LNG Canada

Joint venture / LNG export terminal

Operating Phase 1, building Phase 2

Five-company joint venture operating Canada's first large-scale LNG export facility.

Coastal GasLink (TC Energy)

Natural gas pipeline

Phase 2 expansion approved alongside LNG Canada

670-kilometre pipeline moving Western Canadian gas from Dawson Creek to the Kitimat terminal.

MNT Investments LP

First Nations investment partnership

Holds option to invest up to C$1 billion in Phase 2 storage tank

Limited partnership of economic development arms of five First Nations near the Kitimat facility.

Major Projects Office (MPO)

Federal government office

Fast-tracked Phase 2 federal review

Single point of contact for federal review of major Canadian projects.

Timeline

October 2018 October 2026

7 events Latest: October 2nd, 2026 · 1 week ago

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October 2026
Fluor and JGC get go-ahead for EPC contract
Latest Contract

Engineering News-Record reports Fluor and JGC split a $15-billion engineering, procurement and construction contract for the Phase 2 expansion. They built Phase 1 too.
October 2nd, 2026
Coastal GasLink Phase 2 construction start confirmed for early 2027
Milestone

TC Energy confirms CGL Phase 2 will add five compressor stations to nearly double pipeline capacity. Construction starts in early 2027, with service expected in the early 2030s.
October 2nd, 2026
September 2026
Phase 2 final investment decision
Investment

Shell and four partners approve the C$33 billion expansion, doubling capacity to 28 million tonnes a year.
September 29th, 2026
July 2026
First Nations equity option signed
Deal

Five First Nations sign an option to invest up to C$1 billion for a majority stake in the new storage tank.
July 14th, 2026
September 2025
Federal referral to Major Projects Office
Policy

Government refers Phase 2 to the MPO for a fast-tracked federal review process.
September 2025
January 2025
Phase 1 comes online
Milestone

Kitimat begins LNG production and exports during 2025, Canada's first large-scale shipments to Asian and European buyers.
January 1st, 2025
October 2018
Phase 1 final investment decision
Investment

Five partners commit roughly C$40 billion to build the first two liquefaction trains in Kitimat.
October 2018

Scenarios

Coastal GasLink Phase 2 breaks ground on schedule

Likely Resolves by Q2 2027

Discussed by: LNG Canada, Prime Minister's office, TC Energy

With FID secured, engineering and procurement move forward. TC Energy begins adding five compressor stations in early 2027, and both projects target service in the early 2030s. Prime Minister Carney's Major Projects Office has already set a precedent of a fast approval, and the equity deal with First Nations removes a major source of friction that stalled the pipeline in 2020.

Shell takes impairment as LNG glut hits Phase 2

Possible Resolves by End of 2030

Discussed by: Mark Kalegha, IEEFA

Kalegha warned that 254 million tonnes of competing LNG capacity enters service globally between 2026 and 2030, and that volatile prices for steel, labor and debt could push costs up. If spot prices fall below Phase 2 breakeven, Shell or its partners could write down the value of their stakes.

Compliance orders and opposition slow the Phase 2 build

Possible Resolves by End of 2028

Discussed by: The Narwhal, sustainability advocacy groups

The Kitimat facility has operated under permits it has been out of compliance with since commissioning, tied to flare-stack issues that produced excessive noise, black smoke and a tower of flame. If the BC Energy Regulator issues new orders or local opposition resurges, construction could slip past the early-2030s startup target.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

October 2018

LNG Canada Phase 1 FID (2018)

The same five-company joint venture approved a roughly C$40 billion first phase, then Canada's largest private investment, committing to two 7-million-tonne trains on a site designed for four.

Then

Construction ran well over the original budget and slipped past its initial 2023 startup target.

Now

Phase 1 began exports in 2025, proving Canadian LNG could reach Asian markets through Kitimat's ice-free harbour.

Why this matters now

Phase 2 repeats the Phase 1 structure on the same footprint, betting the first build's hard lessons translate into a faster, cheaper second one.

2000-2011

Mackenzie Valley Pipeline cancellation (2011)

A proposed 1,200-kilometre natural gas pipeline from the Arctic to Alberta spent more than a decade in regulatory review, with environmental and Indigenous opposition mounting and costs climbing.

Then

The consortium pulled the project in December 2011, citing rising costs and policy uncertainty.

Now

It became the standard cautionary tale for Canadian energy mega-projects stalled by permitting delays.

Why this matters now

On the same Western Canadian gas resource, LNG Canada reached FID in a year under the Major Projects Office, a direct contrast with Mackenzie's fate.

February 2020

Coastal GasLink blockades (2020)

Hereditary chiefs of the Wet'suwet'en Nation opposed a pipeline crossing their territory, and blockades nationwide halted rail and construction for weeks on the pipeline that now feeds LNG Canada.

Then

Negotiations and an agreement framework let construction resume after the dispute.

Now

The conflict pushed energy companies toward formal equity agreements with First Nations, the model behind the C$1-billion tank deal in Phase 2.

Why this matters now

Phase 2's Indigenous ownership stake is a direct response to the 2020 conflict that nearly stopped the pipeline it depends on.