Red Flags Abound for BC’s LNG Canada 2 Announcement
September 29, 2026 | British Columbia, Markham on Energy
Count the red flags: a coming supply glut, Asia’s new policies to reduce LNG imports, Qatar’s plan to repair damaged infrastructure and keep growing
The approval of the $33-billion LNG Canada Phase 2 to much hoopla Tuesday is a bet, a roll of the dice by Canada and by Shell and its partners. Will Qatar fully recover from Iranian attacks that damaged the world’s largest LNG export complex? Will the Strait of Hormuz reopen? Will Asian economies respond to volatile Middle East energy prices by accelerating electrification and reducing their dependence on imported natural gas?
The answers will determine whether Canada’s enormous LNG gamble pays off.
If global LNG demand remains strong and Qatar’s exports remain constrained, investors and governments — primarily Ottawa and British Columbia — could profit handsomely. But if Qatar recovers and Asian economies continue electrifying rapidly, LNG Canada could find itself selling into a very different global gas market.
“If Qatar never comes back,” the West Coast project could be fine, Columbia University’s Anne-Sophie Corbeau, one of the world’s leading experts on global LNG markets, told Energi Media.
“But if it does, there will be some unhappy people.”
That is the bet Canada just made.
Phase 2 Doubles LNG Canada Phase 1
LNG Canada is already enormous. The Kitimat facility cost roughly $40 billion to build. The 670-kilometre Coastal GasLink pipeline that feeds it cost $14.5 billion more.
Phase 2 makes the bet much bigger. Shell and its partners will spend another $33 billion to double LNG Canada’s export capacity from 14 million to 28 million tonnes a year. Kitimat will be turned into one of the world’s largest LNG export terminals. Construction is expected to begin in 2027, with the new capacity coming online in the early 2030s.
The Coming Global LNG Supply Wave
Before the Middle East war turned the LNG market upside down, a glut was coming. Global LNG trade in 2025 was 595 billion cubic metres per year (bcm/year), with total production capacity of about 700 bcm. The International Energy Agency (IEA) says roughly 345 bcm/year of new LNG export capacity is scheduled to come online between 2025 and 2030. Other forecasters expect less new supply, but not much less.
Regardless of the final tally, it will be the biggest expansion in the industry’s history. Much of it is being built in the United States and Qatar, with smaller amounts in Canada, the United Arab Emirates and elsewhere.
The IEA expected all that new gas to push prices down and make LNG more attractive to price-sensitive Asian buyers. Then Iran attacked Qatar’s LNG infrastructure and the Strait of Hormuz closed. The disruption has pushed part of that supply wave back. It hasn’t eliminated it.
Even If Qatar fails to repair its damaged facilities and Hormuz remains closed, Phase 2 will arrive just as an enormous volume of competing LNG is entering the global market.
Asia’s Changing LNG Import Patterns
The real question is whether Asia will buy all that gas.
China is the warning sign. Its LNG imports have fallen from their 2021 peak, while Chinese companies increasingly resell contracted cargoes when domestic demand is weak or overseas prices are more attractive. Domestic gas production and pipeline imports are also growing. At the same time, rapid growth in renewables, batteries and electrification is changing how much imported gas China needs.
The problem appears differently across the rest of Asia. Mature LNG markets such as Japan and South Korea offer limited growth. India and emerging Asian economies are still expected to increase LNG consumption, but many of those buyers are highly sensitive to price. LNG must compete with coal, domestic gas and increasingly cheap renewable electricity.
And now Hormuz has added energy security to the calculation. Imported LNG that can suddenly become much more expensive or be disrupted by a geopolitical chokepoint looks less attractive beside electricity generated at home.
That creates a paradox for LNG Canada. The Middle East crisis has made Canadian LNG more valuable today because Kitimat sits on the Pacific and avoids Hormuz. But the same crisis gives Asian governments another reason to reduce their exposure to imported gas over the long term.
Different Views of the Future
Shell is betting on a very big LNG market.
Its 2026 LNG Outlook forecasts global demand rising from 422 million tonnes in 2025 to nearly 700 million tonnes by 2050, an increase of about 65 per cent. Shell expects South and Southeast Asia to account for roughly 40 per cent of global LNG imports by then. And it argues that another 200 million tonnes of annual liquefaction capacity will have to be built in the 2030s and 2040s, on top of projects already under construction.
That view has been embraced by Canadian business advocates.
The Business Council of Canada said global LNG demand is expected to rise significantly through 2050. When Energi Media asked what evidence supported that claim, the council pointed to RBC, Reuters’ coverage of Shell’s forecast and Shell’s own 2026 LNG Outlook.
In other words, the bullish Canadian case rests heavily on the same market outlook being used by the oil and gas company making the investment. Not everyone buys it.
UK-based analyst Seb Kennedy tried to reproduce Shell’s demand projections using recent market trends and policy signals across Asia and couldn’t. His central criticism is that Shell requires spectacular growth from precisely the emerging Asian economies most sensitive to LNG prices. Mature importers such as Japan and South Korea offer little growth.
And China’s imports appear to have already peaked. That leaves India and emerging Southeast Asia carrying much of the growth story. But those buyers consume more LNG when it is cheap and retreat when it becomes expensive: “It’s incredibly difficult to replicate their own demand projections in a credible way,” the founding editor of Energy Flux, told Energi Media earlier this year. “This is a highly ambitious outlook which rests upon lots of things going right, both around market pricing, infrastructure capacity, economic growth, energy transition, fuel switching, global trade [and] liquidity.”
Kennedy says that creates a fundamental problem for LNG Canada and other new projects. Prices may have to fall far enough to generate the enormous demand Shell forecasts, but perhaps so far that producing, liquefying and shipping the LNG is no longer profitable: “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.”
And Kennedy argues that Shell’s public outlook does not provide enough information to test that proposition: “They only release charts. They don’t release data. They don’t explain how their models work. They don’t have any price assumptions baked into it.”
His conclusion was pointed: Shell is the world’s largest publicly traded LNG portfolio player with an obvious commercial interest in convincing investors that LNG demand will continue growing: “You have to view these things, particularly when they don’t make those modelling assumptions public, through that lens.”
There is one important wrinkle worth adding. Shell itself acknowledges much more uncertainty than the headline 65 per cent growth number suggests. In a March investor document, it put 2050 LNG demand in a remarkably wide range of 610 million to 780 million tonnes, equivalent to growth of roughly 45 to 85 per cent from 2025. Shell also said LNG projections are particularly sensitive to developments in Asia.
Closing the Circle
And that brings us back to Qatar.
The Middle East crisis has created an extraordinary opening for Canadian LNG. Qatar’s damaged export infrastructure and the continuing disruption at Hormuz have removed supply from the market just as Canada is preparing a massive expansion on the Pacific coast. If those constraints persist into the 2030s, LNG Canada Phase 2 could arrive in a market hungry for exactly what Kitimat can provide: large volumes of LNG that never have to pass through Hormuz.
But Phase 2 is a decades-long investment, not a bet on today’s crisis. Qatar plans to repair its damaged infrastructure and keep expanding. A huge wave of new LNG capacity is already being built elsewhere. And the Asian economies Canada is counting on are being given powerful new reasons to reduce their dependence on expensive and volatile imported gas.
Which also brings us back to Corbeau’s warning: “If Qatar never comes back, this is fine. But if it does, there will be some unhappy people.”
That is the $33-billion roll of the dice. LNG Canada Phase 2 does not need Asia merely to want Canadian gas today. It needs Asian demand to remain strong enough, for long enough, to absorb Qatar’s return and the biggest expansion of global LNG supply in history.
I wouldn’t take that bet. And neither would Corbeau or Kennedy.