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Shell approves LNG Canada Phase 2, doubling production capacity from 14 mtpa to 28 mtpa.
Shell expects nearly 6 mtpa of additional LNG and double-digit returns once Phase 2 comes online.
Phase 2 also triggers a Coastal GasLink expansion and a Fluor contract valued at about $7.5 billion.
Shell plc (SHEL - Free Report) ,through its affiliate Shell Canada Energy, has taken a final investment decision (FID) on the second phase of the LNG Canada project in Kitimat, British Columbia. The decision clears the way for a major expansion that will double the facility’s production capacity and strengthen Shell’s position in the global liquefied natural gas market.
The move marks a significant development from earlier this month, when the LNG Canada partners were still evaluating the proposed expansion. Phase 2 will add two LNG processing trains and lift the facility’s total production capacity from 14 million tonnes per annum (mtpa) to 28 mtpa. Commercial operations are expected to begin in the early 2030s.
Shell Secures More LNG From Canada
Shell owns a 40% stake in LNG Canada and is expected to receive nearly 6 mtpa of additional LNG once Phase 2 comes online. The expansion is aligned with the energy major’s strategy of maintaining a leading integrated gas and LNG business through the 2040s while connecting Canadian natural gas resources with its worldwide trading and customer network.
The project is also expected to generate double-digit returns and support Shell’s long-term cash-flow growth. Shell said the investment is expected to deliver an internal rate of return above the hurdle rate for its Integrated Gas business.
The latest FID follows LNG Canada’s successful ramp-up. As highlighted in our previous coverage, the first phase shipped its first cargo in 2025 and subsequently reached full capacity. By the second quarter of 2026, the project had delivered more than 100 cargoes, while its ramp-up helped Shell’s first-half 2026 LNG liquefaction volumes rise 17% year over year.
Phase 2 Targets Growing Asian LNG Demand
LNG Canada benefits from its location on Canada’s Pacific Coast, providing relatively direct access to major Asian LNG-consuming markets. This positioning could become increasingly valuable as buyers seek geographically diversified and reliable sources of natural gas.
Shell expects global LNG demand to expand significantly over the coming decades. According to its LNG Outlook 2026, worldwide LNG demand is projected to rise around 60% by 2040 and about 65% by 2050. Demand is expected to increase from 422 mtpa in 2025 to nearly 700 mtpa by 2050, implying the need for additional liquefaction capacity through the 2030s and 2040s.
That outlook strengthens the strategic case for bringing additional Canadian LNG supplies into Shell’s global portfolio.
Expansion Extends Beyond Two New LNG Trains
The Phase 2 development will involve more than the addition of two liquefaction trains. Plans also include another LNG storage tank, a condensate tank, an additional loading berth and expanded utility and processing systems at the existing Kitimat facility.
The LNG Canada joint venture includes Shell with a 40% interest, PETRONAS with 25%, PetroChina with 15%, Mitsubishi Corporation with 15% and Korea Gas Corporation with 5%. Each partner is responsible for marketing its proportional share of LNG production and supplying its share of feed gas.
Earlier plans also created an option for MNT Investments LP, representing five neighboring First Nations, to invest up to C$1 billion for a majority interest in an entity that would own the LNG storage tank associated with Phase 2.
Coastal GasLink Capacity Set to Nearly Double
Shell’s decision has also unlocked TC Energy Corporation’s (TRP - Free Report) related expansion of the Coastal GasLink (CGL) pipeline, which supplies natural gas to LNG Canada.
TRP announced that CGL Phase 2 will now proceed after LNG Canada’s FID satisfied the conditions tied to its previously approved conditional investment decision. The pipeline currently transports about 2.1 billion cubic feet per day of natural gas. Phase 2 is designed to nearly double that capacity by adding compressor stations and upgrading infrastructure along the existing 670-kilometer route to Kitimat.
Under the execution structure, LNG Canada will manage construction while CGL will remain the pipeline’s owner, operator and permit holder. CGL and TC Energy will provide certain technical advisory and procurement services along with operational expertise to support delivery. The structure is intended to limit CGL’s capital commitments as well as its exposure to construction cost and scheduling risks.
Fluor Lands Major Phase 2 Contract
The FID also created a major project opportunity for Fluor Corporation (FLR - Free Report) . Fluor said its joint venture with JGC Corporation has been selected to provide engineering, procurement, fabrication, construction and commissioning services for Phase 2.
Fluor’s share of the award is valued at approximately $7.5 billion and is expected to enter its backlog in the third quarter of fiscal 2026. The contract adds substantial long-duration work to Fluor’s Energy Solutions business and gives the company another large assignment at the LNG Canada site after its involvement in the first phase.
LNG Canada Becomes a Bigger Pillar of Shell’s LNG Strategy
The Phase 2 FID transforms LNG Canada from a recently commissioned growth project into a much larger long-term platform for Shell, currently carrying a Zacks Rank #3 (Hold). Doubling capacity to 28 mtpa gives the company greater access to Asian LNG demand while broadening the geographic diversity of its global supply portfolio.
The decision also triggers sizable infrastructure work beyond the liquefaction plant, including the Coastal GasLink expansion and a multibillion-dollar Fluor contract. With global LNG consumption expected to rise substantially over the coming decades, LNG Canada Phase 2 could become an increasingly important contributor to Shell’s Integrated Gas growth and cash-flow ambitions.
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Image: Bigstock
Shell Greenlights LNG Canada Phase 2, Doubling Export Capacity
Key Takeaways
Shell plc (SHEL - Free Report) ,through its affiliate Shell Canada Energy, has taken a final investment decision (FID) on the second phase of the LNG Canada project in Kitimat, British Columbia. The decision clears the way for a major expansion that will double the facility’s production capacity and strengthen Shell’s position in the global liquefied natural gas market.
The move marks a significant development from earlier this month, when the LNG Canada partners were still evaluating the proposed expansion. Phase 2 will add two LNG processing trains and lift the facility’s total production capacity from 14 million tonnes per annum (mtpa) to 28 mtpa. Commercial operations are expected to begin in the early 2030s.
Shell Secures More LNG From Canada
Shell owns a 40% stake in LNG Canada and is expected to receive nearly 6 mtpa of additional LNG once Phase 2 comes online. The expansion is aligned with the energy major’s strategy of maintaining a leading integrated gas and LNG business through the 2040s while connecting Canadian natural gas resources with its worldwide trading and customer network.
The project is also expected to generate double-digit returns and support Shell’s long-term cash-flow growth. Shell said the investment is expected to deliver an internal rate of return above the hurdle rate for its Integrated Gas business.
The latest FID follows LNG Canada’s successful ramp-up. As highlighted in our previous coverage, the first phase shipped its first cargo in 2025 and subsequently reached full capacity. By the second quarter of 2026, the project had delivered more than 100 cargoes, while its ramp-up helped Shell’s first-half 2026 LNG liquefaction volumes rise 17% year over year.
Phase 2 Targets Growing Asian LNG Demand
LNG Canada benefits from its location on Canada’s Pacific Coast, providing relatively direct access to major Asian LNG-consuming markets. This positioning could become increasingly valuable as buyers seek geographically diversified and reliable sources of natural gas.
Shell expects global LNG demand to expand significantly over the coming decades. According to its LNG Outlook 2026, worldwide LNG demand is projected to rise around 60% by 2040 and about 65% by 2050. Demand is expected to increase from 422 mtpa in 2025 to nearly 700 mtpa by 2050, implying the need for additional liquefaction capacity through the 2030s and 2040s.
That outlook strengthens the strategic case for bringing additional Canadian LNG supplies into Shell’s global portfolio.
Expansion Extends Beyond Two New LNG Trains
The Phase 2 development will involve more than the addition of two liquefaction trains. Plans also include another LNG storage tank, a condensate tank, an additional loading berth and expanded utility and processing systems at the existing Kitimat facility.
The LNG Canada joint venture includes Shell with a 40% interest, PETRONAS with 25%, PetroChina with 15%, Mitsubishi Corporation with 15% and Korea Gas Corporation with 5%. Each partner is responsible for marketing its proportional share of LNG production and supplying its share of feed gas.
Earlier plans also created an option for MNT Investments LP, representing five neighboring First Nations, to invest up to C$1 billion for a majority interest in an entity that would own the LNG storage tank associated with Phase 2.
Coastal GasLink Capacity Set to Nearly Double
Shell’s decision has also unlocked TC Energy Corporation’s (TRP - Free Report) related expansion of the Coastal GasLink (CGL) pipeline, which supplies natural gas to LNG Canada.
TRP announced that CGL Phase 2 will now proceed after LNG Canada’s FID satisfied the conditions tied to its previously approved conditional investment decision. The pipeline currently transports about 2.1 billion cubic feet per day of natural gas. Phase 2 is designed to nearly double that capacity by adding compressor stations and upgrading infrastructure along the existing 670-kilometer route to Kitimat.
Under the execution structure, LNG Canada will manage construction while CGL will remain the pipeline’s owner, operator and permit holder. CGL and TC Energy will provide certain technical advisory and procurement services along with operational expertise to support delivery. The structure is intended to limit CGL’s capital commitments as well as its exposure to construction cost and scheduling risks.
Fluor Lands Major Phase 2 Contract
The FID also created a major project opportunity for Fluor Corporation (FLR - Free Report) . Fluor said its joint venture with JGC Corporation has been selected to provide engineering, procurement, fabrication, construction and commissioning services for Phase 2.
Fluor’s share of the award is valued at approximately $7.5 billion and is expected to enter its backlog in the third quarter of fiscal 2026. The contract adds substantial long-duration work to Fluor’s Energy Solutions business and gives the company another large assignment at the LNG Canada site after its involvement in the first phase.
LNG Canada Becomes a Bigger Pillar of Shell’s LNG Strategy
The Phase 2 FID transforms LNG Canada from a recently commissioned growth project into a much larger long-term platform for Shell, currently carrying a Zacks Rank #3 (Hold). Doubling capacity to 28 mtpa gives the company greater access to Asian LNG demand while broadening the geographic diversity of its global supply portfolio.
The decision also triggers sizable infrastructure work beyond the liquefaction plant, including the Coastal GasLink expansion and a multibillion-dollar Fluor contract. With global LNG consumption expected to rise substantially over the coming decades, LNG Canada Phase 2 could become an increasingly important contributor to Shell’s Integrated Gas growth and cash-flow ambitions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.