October 03, 2025 [Oil Price]- The highly anticipated LNG Canada terminal exported its first cargo of liquefied natural gas (LNG) on 30 June 2025 from its facility in Kitimat, British Columbia, marking the nation’s entry into the exclusive LNG export club. LNG Canada, a joint venture between Shell (40%, lead partner), Petronas (25%), PetroChina (15%), Mitsubishi (15%), and Korea Gas (5%), achieved the milestone six years after it took the final investment decision (FID). Western Canada has seen extremely low gas prices – primarily driven by an oversupply from operators with robust growth plans and choke points moving gas both within the basin and to other markets – as a result of which operators have long awaited the start-up of LNG Canada to increase access and boost prices.

Even so, as Rystad Energy analysts wrote in October 2024, strong 2025 production guidance from the major Canadian operators, combined with robust activity levels from smaller, private producers, pointed to a continued oversupplied market despite the startup of LNG Canada. Indeed, this scenario has unfolded thus far in 2025. AECO spot prices have averaged near $0.55 per MMBtu over the past three months, since the start of LNG Canada. Seasonality does play a role as gas prices tend to be lower when in-basin demand is weaker during summer months, but the market fundamentally remains oversupplied as increasing feedgas demand for LNG Canada has not yet caught up with the strength in supply.

So far, production ramp-up at the LNG Canada facility has been slow, although it is common for new terminals to experience some operational hiccups. At the beginning of August, LNG Canada’s cargo loadings slowed as train 1 was operating near 50% utilization because of operational issues with one of its gas turbines. The pace of shipments in August averaged one cargo every nine days, while at full capacity, each train will be able to export one cargo every four days. The pace of shipments remained the same in early September, although feedgas pulls reportedly increased to around 80% at the end of August, indicating a step up in the pace of shipments. Looking ahead, Rystad Energy expects LNG Canada’s first train to hit full capacity by the end of October, with train 2 starting its ramp-up in November and the facility reaching full capacity by May of next year. Despite the 1.8 billion cubic feet per day (Bcfd) of feedgas that LNG Canada will demand at full capacity, our view of AECO prices in the short term remains bearish, as many players in the BC Montney can easily ramp up production, with decades of low-breakeven inventory. Once midstream capacity comes online, it is likely to quickly be filled by producers.

With that said, future Canadian LNG prospects look promising. Woodfibre LNG and Cedar FLNG, two projects currently under development, are expected to begin ramping up in 2027 and 2029, respectively, adding an extra 0.7 Bcfd of feedgas demand. Pre-FID LNG capacity has also made regulatory progress recently. LNG Canada Phase 2 was selected on the first series of infrastructure projects referred to the Major Projects Office (MPO) for expedited approval, while Ksi Lisims LNG received a green light to be built from the BC and Federal government through the Impact Assessment Act. Work on the Prince Rupert Gas Transmission (PGRT) pipeline has also commenced, with a shorter route approved by the BC government in August. With Shell recently making positive statements about LNG Canada Phase 2 and Ksi Lisims signing additional SPAs this year, the projects are also making commercial progress. In total, by the mid-2030s, Canada’s liquefaction capacity could total 6.1 Bcfd.