LNG Canada’s $33-Billion Bet on Asia

Qatar’s return, a supply wave and accelerating electrification could turn today’s opportunity into tomorrow’s expensive mistake

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Canada just placed a $33-billion bet on the future of Asian energy demand. The enthusiasm surrounding LNG Canada Phase 2 suggests a sure thing. The evidence suggests a gamble.

Shell and its partners plan to double the Kitimat terminal’s export capacity to 28 million tonnes annually. Construction is expected to begin in 2027, with production starting in the early 2030s.

What will the market look like then?

“If Qatar never comes back,” the project could be fine, Columbia University LNG expert Anne-Sophie Corbeau told Energi Media.

“But if it does, there will be some unhappy people.”

That warning deserves more attention than the celebratory announcements.

Iranian attacks on Qatar’s LNG infrastructure and the closure of the Strait of Hormuz have disrupted global supply. Canadian LNG, shipped directly across the Pacific, suddenly looks more attractive.

But a project expected to operate for decades needs a business case that survives the current crisis.

Qatar plans to repair its damaged infrastructure and continue expanding. Meanwhile, the International Energy Agency identified roughly 345 billion cubic metres of annual export capacity scheduled to enter service between 2025 and 2030. Last year’s LNG trade was 585 billion cubic metres. The new capacity is a whopping 59 per cent increase in just five years.

The war has delayed part of that unprecedented expansion. It hasn’t eliminated it. LNG Canada’s new production will face plenty of competition.

Then there is demand.

China’s LNG imports have fallen from their 2021 peak. Domestic gas production and pipeline imports are growing, while renewables, batteries and electrification are changing the country’s energy needs. Japan and South Korea offer limited growth.

That leaves India and emerging Asian economies carrying much of the industry’s expansion story. These buyers are highly sensitive to price. They buy more LNG when it is cheap and retreat when it becomes expensive.

Shell nevertheless forecasts global LNG demand growing about 65 per cent between 2025 and 2050.

When Energi Media asked the Business Council of Canada to substantiate its bullish demand claim, it pointed to RBC, Reuters’ coverage of Shell’s forecast, and Shell’s own outlook.

Canada’s confidence rests heavily on projections from a company making the investment.

Energy Flux editor Seb Kennedy tried to reproduce Shell’s projections and couldn’t.

“The burden of proof is upon Shell to prove that demand can grow as fast as they say it will and at a price that’s profitable for projects like LNG Canada,” he told Energi Media.

That is the central problem. Cheap LNG might create the demand Shell anticipates. It might also undermine the profitability of supplying it.

The Middle East crisis adds another complication. Asian governments now have stronger incentives to replace volatile imported fuels with electricity generated at home.

The same disruption making Canadian LNG valuable today could accelerate the changes weakening its market tomorrow.

Phase 2 needs Asian demand to remain strong enough, for long enough, to absorb Qatar’s return and an enormous expansion of competing supply.

Corbeau’s warning brings the argument full circle. Canada is committing to capacity arriving years from now, while today’s enthusiasm draws strength from a crisis whose duration nobody can guarantee.

I wouldn’t take that bet.