The Shell-led LNG Canada project is facing technical challenges as it increases production at its liquefied natural gas (LNG) facility in Kitimat, BCThis has resulted in at least one tanker being diverted without loading cargo, which was confirmed by four industry sources and LSEG's ship tracking data, Reuters reported. The $40-billion project — the largest private-sector investment in Canadian history — is the first major LNG export terminal in Canada and the only one on the west coast of North America, giving producers direct access to Asia, the world’s biggest LNG market.LNG Canada is a joint venture between Shell (40%), Malaysia’s Petronas (25%), PetroChina (15%), Japan’s Mitsubishi Corp., (15%) and South Korea’s KOGAS (5%)..Kitimat-based LNG Canada produces first liquefied gas for export.“We expect that supplying LNG will be the biggest contribution Shell will make to the energy transition over the next decade, and projects like LNG Canada position our portfolio to achieve this,” Cederic Cremers, Shell’s president for integrated gas, said in a news release about the facility’s first cargo shipment earlier this month.According to company statements, when fully operational, the plant is expected to convert roughly two billion cubic feet of natural gas per day into LNG, with a capacity to export 14 million metric tonnes per annum (mtpa).However, two of the sources — who spoke on the condition of anonymity because the information was not public — told Reuters the facility has been operating at less than half the capacity of its first processing unit, or “train,” due to technical problems.Two additional sources described issues with a gas turbine and a refrigerant production unit.LSEG ship tracking data showed Shell diverted at least one empty LNG tanker to Peru while several others remain near the Kitimat facility.A spokesperson for LNG Canada told Reuters they acknowledged the project is “still in the early stages of production.”.LNG Canada ships first cargo from BC facility.“A new-build facility of the size and complexity of LNG Canada requires a break-in period to stabilize, which is normal in new LNG facilities,” the spokesperson said.Despite LNG Canada’s July 1 startup, Western Canadian natural gas prices have remained depressed because of an ongoing supply glut.A July report from advisory firm Deloitte forecast a jump in Alberta natural gas prices next year in part due to the Kitimat facility opening.The Alberta Energy Company (AECO) price was expected to average $2.20 per million British thermal units (MMBtu)in the second half of this year and then rise to an average of $3.50 per MMBtu in 2026.It averaged $1.36 per MMBtu in 2024.“The AECO spot price closed at US$0.22 per MMBtu on Tuesday, far below the U.S. Henry Hub benchmark of US$3.12, according to LSEG data,” Reuters reported.Tom Purdie, senior LNG analyst at Energy Aspects, told the Globe and Mail that “any reduction in LNG Canada’s output could tighten global markets.”“Further Canadian supply losses would tighten the Pacific market, compounding the impact of ongoing Australian outages and robust Asian demand,” Purdie said.
