A Reuters report on September 17 revealed that Shell plc (NYSE:SHEL) and its partners in the LNG Canada export project could reach a final investment decision on its Phase 2 expansion as early as October. The proposed expansion would add 14 million metric tons per year (mtpa) of LNG export capacity to the facility in British Columbia, effectively doubling the project’s total capacity to 28 mtpa.
Shell holds a 40% stake in the LNG Canada project, making it the largest shareholder and lead backer of the joint venture. The project is seen as a cornerstone of Canada’s effort to become a major global LNG exporter. The first phase of the project cost C$40 billion, with the facility shipping its first cargo earlier this year.
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A Bigger Slice of Asian LNG Demand:
The development comes at a time when the broader LNG environment looks favorable, supported by tight global markets, outages among major producers, and strong long-term demand growth from countries seeking to replace coal with cleaner natural gas.
The US-Iran war has effectively choked around a fifth of the global LNG supply. Even if a peace deal is achieved, it could take years for Qatar to make repairs and bring its LNG output to pre-war levels. The supply crunch has therefore prompted customers, especially those in Asia, to seek alternative sources. LNG Canada’s Pacific Coast location provides shorter shipping routes to key Asian markets compared with US Gulf Coast exporters, which must transit the Panama Canal.
The expansion would also fit Shell’s broader Canadian strategy following its acquisition of ARC Resources. The $16.4 billion deal has significantly expanded the energy giant’s gas reserves, boosting its production by 370,000 boed. Therefore, a potential expansion of LNG Canada could provide an outlet for the company’s larger gas position in the country.
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The Expansion Isn’t a Done Deal:
It is worth noting that the project remains unapproved as of yet, with Shell itself clarifying that any decision on the expansion will consider factors such as competitiveness, affordability, government support, and stakeholder needs. The existing Phase 1 project cost about C$40 billion, illustrating the scale of the capital involved.
The weakening LNG demand in China is also a cause for concern. The country’s total LNG imports fell to a three-year low of 68.43 million tons in 2025 as it prioritized piped gas and renewable energy in its overall energy mix.
Lastly, there are also concerns regarding a potential global LNG supply glut. If supply growth outpaces demand, it could lead to a much weaker price environment, and the economics of committing billions of dollars to additional capacity could become less attractive.
Conclusion:
Shell’s potential Phase 2 expansion of LNG Canada would double the project’s capacity, allowing the company to capitalize on tight global LNG markets and the rising Asian demand. However, the project remains unapproved and would require substantial capital amid uncertainty over Chinese demand and future LNG oversupply.
Market Sentiment:
Shell plc (NYSE:SHEL) was held by 49 hedge funds in the Insider Monkey database at the end of Q2 2026, with a total investment value of around $5.35 billion. This is down from 45 hedge fund investors with a total stake value of just over $5.66 billion in the previous quarter.
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This article is originally published at Insider Monkey.
