Shell plc SHEL has taken a significant step forward in the development of LNG Canada's proposed Phase Two expansion, signaling continued confidence in the long-term outlook for global liquefied natural gas demand. According to upstreamonline, the company, through the LNG Canada joint venture, has issued a limited notice to proceed to its lead contractors, allowing preliminary work to begin ahead of a potential final investment decision expected later in 2026.
This move represents an important milestone for one of North America's most prominent LNG export projects. Located in Kitimat, British Columbia, LNG Canada has already established itself as a strategic gateway connecting Canada's vast natural gas resources to international markets. With Phase One successfully reaching first LNG production and delivering its inaugural cargo in 2025, attention has increasingly shifted toward the project's next stage of growth.
LNG Canada Targets Significant Production Growth
The proposed Phase Two expansion would double LNG Canada's production capacity from 14 million tons to 28 million tons per annum. Such an increase would strengthen Canada's position in the global LNG sector at a time when energy-importing nations continue seeking reliable and diversified sources of natural gas.
The limited notice to proceed enables early planning activities that will help prepare the project for a future investment decision. These activities typically include engineering preparation, procurement planning, workforce mobilization strategies and project scheduling. By initiating these processes early, LNG Canada aims to maintain momentum while evaluating the commercial and market conditions necessary to support full project approval.
The decision to advance preliminary work reflects growing confidence among project partners regarding the long-term role of LNG in the global energy landscape. Demand growth across Asia and other international markets continues to support investment in large-scale export infrastructure capable of delivering stable supplies over multiple decades.
Fluor and JGC Continue Their Role in Project Development
The engineering and construction partnership between Fluor Corporation and JGC Corporation remains central to LNG Canada's expansion plans. The joint venture previously delivered key engineering, procurement, fabrication management, construction and commissioning services during Phase One.
Their successful execution of the initial development phase has provided LNG Canada with an experienced team already familiar with the project's technical requirements, operating environment and logistical complexities. The continuity offered by retaining the same lead contractors is expected to support efficiency and reduce project execution risks as planning progresses.
According to Fluor, the notice allows the joint venture to begin essential activities that will support LNG Canada's evaluation process leading up to a final investment decision. This early engagement shows the project's commitment to maintaining readiness should approval be granted.
Shell Strengthens Access to Canadian Natural Gas Resources
The expansion strategy is supported by Shell's broader efforts to increase its exposure to Canadian natural gas assets. A major development occurred with the company's acquisition of Arc Resources AETUF, a transaction valued at approximately $16.4 billion.
The acquisition enhances Shell's access to natural gas reserves within the Montney formation, one of Canada's most productive and strategically important resource plays. Industry observers have highlighted the deal as a significant step toward securing long-term feed gas supplies for LNG Canada.
Access to reliable upstream resources is a critical component of any LNG export project. By strengthening its position within the Montney region, Shell is improving supply security while creating additional flexibility to support production growth. The acquisition also reinforces the integration between resource development and LNG export operations, providing greater control across the value chain.
Coastal GasLink Expansion Supports Growth
A successful expansion of LNG Canada will require corresponding enhancements to supporting infrastructure, particularly the Coastal GasLink pipeline system. The pipeline serves as the crucial transportation link connecting natural gas production areas in Western Canada with the LNG export terminal in British Columbia.
Recognizing the importance of this infrastructure, Shell recently awarded a front-end engineering and design contract related to the proposed next phase of Coastal GasLink development. The work will evaluate the requirements necessary to transport increased volumes of natural gas to support additional LNG production capacity.
Pipeline expansion is expected to play a key role in ensuring operational reliability and maintaining the efficiency of LNG Canada's integrated supply chain. The combination of upstream resource access, transportation infrastructure and export capacity forms the foundation of the project's long-term growth strategy.
Strong Partnership Structure Supports LNG Canada's Ambitions
LNG Canada benefits from the backing of several major international energy companies. Shell holds a 40% interest in the venture, making it the largest shareholder. The remaining ownership is divided among Petronas, PetroChina, Mitsubishi Corporation and KOGAS.
This diverse ownership structure provides access to global expertise, financial strength and extensive LNG marketing networks. The participation of major Asian energy companies is particularly important, as it strengthens connections with some of the world's largest LNG-consuming markets.
The consortium model has helped LNG Canada attract investment while ensuring broad commercial support across multiple regions. As global competition for LNG supply intensifies, the project's strong partnership base remains a significant competitive advantage.
Global LNG Demand Continues to Drive Investment
The rationale behind LNG Canada's expansion is closely tied to long-term expectations for global natural gas demand. Many countries continue investing in LNG import infrastructure as they seek to diversify energy supplies and improve energy security.
Natural gas remains an important component of the global energy mix due to its ability to provide reliable power generation while producing lower carbon emissions than coal. As economies continue to expand and energy demand increases, LNG is expected to play a growing role in balancing affordability, reliability and sustainability objectives.
Canada's geographic location provides LNG Canada with an additional advantage. Shorter shipping routes to major Asian markets can improve competitiveness and reduce transportation costs compared with some alternative export regions.
Looking Ahead to a Final Investment Decision
Although LNG Canada's partners have not yet made a final investment decision on Phase Two, recent developments indicate meaningful progress toward that objective. Early contractor engagement, strengthened upstream resource access and ongoing infrastructure planning collectively demonstrate the project's commitment to expansion.
If approved, Phase Two would represent one of the most significant energy investments in Canada and further establish LNG Canada as a major supplier within the international LNG market. The project would create substantial economic benefits while enhancing Canada's role as a reliable global energy exporter.
As planning activities continue throughout 2026, industry participants will closely monitor developments surrounding LNG Canada's next phase. The outcome could have lasting implications for Canada's energy sector, global LNG supply dynamics and the growth trajectory of Shell's international gas portfolio.
SHEL's Zacks Rank & Key Picks
Currently, SHEL and AETUF both have a Zacks Rank #3 (Hold).
Investors interested in the energy sector might look at some better-ranked stocks like Chevron CVX and Marathon Petroleum MPC, sporting a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron is valued at $363.39 billion. It is one of the world's largest integrated energy companies, engaged in oil and natural gas exploration, production, refining and marketing across multiple continents. Chevron is also investing in lower-carbon technologies, including renewable fuels, hydrogen and carbon capture, to support the global energy transition.
Marathon Petroleum is valued at $72.63 billion. It is one of the largest downstream energy companies in the United States, operating extensive refining, transportation and fuel marketing networks. Through its refining assets and retail fuel brands, Marathon Petroleum supplies gasoline, diesel and other petroleum products to consumers and businesses nationwide.
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