LNG Canada Phase 2 Nears October FID as Asian Buyers Circle
A final investment decision on the 14 mtpa expansion could double Kitimat's capacity, locking in Canada's pivot to Asia while Hormuz disruption keeps JKM near $27.
Shell and its partners at LNG Canada have cleared another procedural gate on the Phase 2 expansion, with a final investment decision possible as early as October. The JFJV2 joint venture, comprising Fluor Canada and JGC Contractors, received limited notice to proceed in early June (2026-06-02), authorizing procurement and early engineering work for a second 14 mtpa train at Kitimat, British Columbia. Approval would double the facility's capacity to 28 mtpa.1
That matters for a market that has spent 2026 pricing Middle East supply risk. Shell's tenth annual LNG outlook, published in June (2026-06-30), forecast global demand rising 65% to nearly 700 million tonnes a year by 2050, even as shipping disruptions in the Strait of Hormuz threatened to keep global LNG trade flat through 2026. The company said around 180 million tonnes of new annual supply is needed by 2030.4,3
The spot market is already signalling scarcity. JKM, the Asian LNG benchmark, is quoted at $26.75/MMBtu, while TTF front-month in Europe sits at €76.27/MWh. Those are crisis-level numbers, and they explain why buyers are no longer restricting themselves to Qatari or US volumes.6
Middle East buyers are actively inquiring about Canadian cargoes. Ratnesh Bedi, president of Singapore-based Pacific Energy, which holds a 70% stake in the Woodfibre LNG project near Squamish, BC, said in August (2026-08-08) that his company is fielding inquiries from the region as a hedge against geopolitical turmoil. Woodfibre is a smaller project, but the direction of travel is the same: Canada's Pacific Coast is being re-rated from marginal supplier to strategic alternative.6
Ottawa has encouraged that reading. Canada signed its first binding long-term LNG contract to export directly to Europe in late July (2026-07-30), a 20-year offtake agreement with Germany's Uniper for supply from the proposed Ksi Lisims LNG project on British Columbia's northern coast. Separately, German state-owned SEFE agreed to purchase 1 mtpa from Ksi Lisims. The federal government's push to diversify away from the United States — underlined by a Canadian energy industry report in June (2026-06-25) that described Asia as crucial to that effort — now has commercial scaffolding.5,12
For Shell, the Phase 2 economics rest on more than geopolitics. The company's outlook sees emerging Asian domestic gas production declining even as demand rises, leaving the region short around 300 million tonnes a year by 2050. Data centres are adding power demand on top of the coal-to-gas switching story.3
Analysts caution that higher prices are already curbing South Asian demand, with buyers turning to alternative sources or switching back to coal and domestic gas. That is the counterweight to the bullish narrative: $26.75 JKM is not a price at which every buyer stays in the market.3
The FID itself is not guaranteed. Limited notice to proceed authorizes early planning, not construction. The joint venture must still sanction the full spend, and the partnership — Shell at 40%, Petronas at 25%, PetroChina at 15%, Mitsubishi at 15% and Kogas at 5% — has to agree on terms in a market where cost inflation for BC labour and pipeline capacity has been a recurring theme.1
What Phase 2 would change is the arbitrage geometry. Canadian cargoes to Asia avoid the Strait of Hormuz entirely, and Vancouver-area loadings cut shipping distances to Japan and Korea by roughly half compared with US Gulf Coast routes. In a world where Shell itself warns that Hormuz disruption could keep trade flat this year, that is a structural selling point.3
The unresolved question is timing. An October FID would put first LNG from Phase 2 in the early 2030s, behind the 2028-29 wave of US and Qatari supply. If Shell's 180 mtpa-by-2030 supply forecast lands, the market could be looser just as Kitimat's second train starts up. Buyers are hedging geopolitics. They may end up hedged against a glut instead.4
Next signal to watch: whether the LNG Canada partners convert limited notice into a full FID before the end of Q4, and whether Asian offtake agreements for Phase 2 volumes are announced alongside it.1