Shell LNG Canada $23bn Expansion|Asian Demand Bet Against Supply Glut Fears?

The bet and who holds it

Shell and its partners have approved a twenty-three billion dollar expansion of the LNG Canada gas export plant. Its extra gas arrives in the early 2030s, into a market where new projects had already fuelled fears of a glut. Shell's own view is on the record. Shell says demand for liquefied natural gas in Asia is expected to increase significantly.

Its outlook sees global demand reaching nearly seven hundred million tonnes a year by 2050. That would be sixty-five per cent above the level of 2025. The expansion doubles the plant, from fourteen to twenty-eight million tonnes a year. Shell owns forty per cent of it. Under the partners' rules, Shell must find buyers for its own share. That share of the new gas is nearly six million tonnes a year.

How far the commitment reaches

LNG Canada, in Kitimat, British Columbia, is the country's first export plant for liquefied natural gas. It only launched exports in the summer of 2025. Little more than a year later, its owners have committed to doubling it. Two new processing units, known as trains, will sit beside the existing two. LNG Canada calls the decision one of the largest private sector investments in Canada.

The commitment does not stop at the plant fence. Gas reaches Kitimat through the Coastal GasLink pipeline, six hundred and seventy kilometres long. Its owner, TC Energy, had approved its own expansion only on condition that this decision was taken. That condition is now met. TC Energy says the pipeline carries about 2.1 billion cubic feet of gas a day. Five new compressor stations will nearly double that capacity.

At the coast, the plant gains a new storage tank and a new loading berth. So the bet now runs from the gas field to the ship. Pipeline and plant alike are being built for roughly twice today's flow.

Who carries the risk

The key question is how that gas will be sold. Shell's Integrated Gas President, Cederic Cremers, put it in Shell's terms. He said Phase 2 connects Canadian resources with "Shell's global LNG portfolio, trading capability and customer reach". LNG Canada's chief executive, Chris Cooper, framed it differently. He said, "Phase 2 is about much more than tonnes." He added that it will "create thousands of jobs".

Neither statement dwells on who carries the price of the gas. The answer sits in the plant's structure. LNG Canada runs under what the partners call equity lifting. Each owner takes its own share of the output. Each also brings its own share of the gas supply. There is no single buyer standing behind the plant. For Shell, forty per cent of the new capacity works out at about 5.6 million tonnes a year.

That matches the nearly six million tonnes Shell says it will receive. Shell is described as the world's biggest LNG trader. The task of finding buyers for that gas falls to its own traders. Shell is not the only owner taking that risk. Malaysia's Petronas holds twenty-five per cent. PetroChina and Japan's Mitsubishi hold fifteen per cent each. Korea Gas Corporation holds five per cent.

Petronas, PetroChina and Korea Gas are all state-owned. Together, the Chinese, Japanese and Korean partners hold thirty-five per cent. Each of them must also take and sell its own share. A different kind of investor has also chosen to add to the bet. MidOcean Energy is an LNG company formed and managed by EIG, an institutional investor in energy and infrastructure.

In December 2025, MidOcean completed the purchase of twenty per cent of the partnership holding Petronas's stake in LNG Canada. Through that partnership, it is joining Phase 2. MidOcean says its LNG volumes linked to the project will double. They rise from 0.7 to 1.4 million tonnes a year. So this is not one company's view of Asian demand. If that demand falls short, it will not be Shell alone that misjudged it.

The whole group of owners will have misjudged it together.

The glut question

That market was already crowded before this decision. According to the Wall Street Journal, a spate of new projects in the US and around the world had fuelled fears of a supply glut. The United States is the world's largest exporter of LNG. China is the world's biggest importer. Trade between them has been at a standstill since February 2025. That was when Beijing imposed a fifteen per cent tariff.

Reuters reported in September that the two sides were discussing lifting that tariff. Newsbase analysts say the US already faces increased competition in Asian markets from Canada and Mexico. LNG Canada's partners describe Kitimat as offering competitive shipping routes to key Asian markets. If American gas returns to China, it competes for those same buyers.

Shell's forecast has to hold up against both sources of supply. For now, those fears have eased. The Wall Street Journal says the conflict in the Middle East has changed the equation. It says the near closure of the Strait of Hormuz and damage to Gulf LNG plants have likely pushed back oversupply concerns. The disruption was severe.

Crude, fuel and LNG prices hit record or multi-year highs earlier this year, as the Iran war effectively halted tanker traffic out of the Gulf. But the Journal's own words set a limit. It says the conflict changed the equation over the near term. Canada's new trains start commercial operations in the early 2030s. Even forecasters who raised their gas price forecasts expect prices to come down.

HSBC now sees European gas at 22.5 dollars per million British thermal units in the second half of 2026. For 2027, it sees seventeen dollars. HSBC's oil forecasts assume only a partial, gradual recovery in flows through Hormuz. Even on those assumptions, the bank expects gas to be cheaper next year. Other new supply is lining up ahead of Kitimat.

TotalEnergies forecasts that its Mozambique LNG project will come online in 2029. That project is designed for thirteen million tonnes a year. Phase 2 adds fourteen million tonnes. So the Mozambique volume is almost as large, and it is due first. Reuters described the project as a chance for TotalEnergies to narrow the lead of its rival, Shell. The conditions that make this decision look well timed are near term.

Shell's new gas is aimed at the decade after.

What shareholders hold

For Shell's shareholders, the decision lands at a particular moment. In May, Shell cut its quarterly share buyback to three billion dollars. It had been 3.5 billion. Now Shell is committing to a project in which it must sell nearly six million tonnes of gas a year on its own account. Shell says the investment fits its disciplined capital allocation framework.

It says the project is expected to generate double-digit returns. That expectation is Shell's own. It depends on the prices its traders can get in the 2030s. At the start, Shell was doubling supply into a market that had feared too much supply. That now reads as a bet that the tightness caused by the Gulf disruption lasts well beyond the near term.

The signal to watch is how quickly LNG shipments through Hormuz and from damaged Gulf plants recover. If they recover quickly and fully, the oversupply concerns could return before Kitimat's new trains start. That would put pressure on the returns Shell expects, and on every owner selling its own share. If the recovery stays partial and gradual, as HSBC assumes, the window Shell is betting on stays open for longer.

Then the owners who chose to sell their own gas stand to gain.

Informational only, not investment advice. Figures and quotes come from the linked reports.