As industry groups urge Canada to accelerate its LNG projects following the US permitting pause, IEEFA analysts dismiss this thought as a “mere distraction” from looming oversupply. The LNG Canada project in Kitimat, BC, set to come online in 2025, will coincide with projects in Mexico, Congo, Mauretania, Gabon, Russia and Australia.
“If anything, the timing of the announcement [of the US Department of Energy] is instructive. The global LNG market is currently saturated with numerous projects under construction — including five in the United States that are not affected by the pause,” IEEFA analysts Mark Kalegha and Christopher Doleman commented.
Production from such terminals is likely to tip the sector to a position of oversupply. By 2026, the world could see a 13 percent increase in LNG supply capacity — the largest annual increase in history, IEEFA forecasts, anticipating a global LNG glut in the latter half of this decade.
“With a high share of uncontracted volumes, proposed Canadian projects are especially vulnerable,” the two analysts warn, stressing: “It makes little sense for Canadian industry to aggressively push more LNG into the ocean when (….) buyers are unsure of their long-term needs.”
Phase-2 of the LNG Canada project is being evaluated but Shell has postponed an investment decision in late February amid a fall in earnings. If it goes ahead, the expansion will double the liquefaction plant’s capacity from 14 mtpa to a massive 28 mtpa. Peak construction on Phase-1 was reached last autumn and the project in Kitimat is now just under90 percent complete. Despite the delay on the expansion, British Columbia's Premier Christi Clark said she is optimistic that Shell will make an investment decision “within the year.”
