LNG Canada will rely on Chinese steel components for the $33-billion Phase 2 expansion of its export facility in Kitimat, British Columbia. Prime Minister Mark Carney told reporters that the choice of materials belongs entirely to the project proponents, despite earlier federal pledges to place major infrastructure developments at the center of a comprehensive Buy Canadian policy, cbc.ca reported.
Expanding Output to 28 Megatonnes at Kitimat
The private consortium behind the project announced the Phase 2 investment on Tuesday, adding two more processing units—known as trains—to the site. This addition brings the facility’s total to four trains, raising expected production from 14 megatonnes to 28 megatonnes of liquefied natural gas per year once construction concludes in the early 2030s.
To achieve this scale, LNG Canada will again contract state-owned China Offshore Oil Engineering Co., Ltd. (COOEC) to manufacture specialized modules. COOEC previously supplied the first two processing units currently operating at the Kitimat terminal.
Prime Minister Carney Defers to Project Developers
When asked by CBC News whether the expansion would rely on Canadian or Chinese steel, Prime Minister Carney stated that the decision rests with the project developers.
"It’s a great question for the proponents of Phase 2," Carney said during the final investment decision event. "I’ll leave it to them. Canadian steel remains fully available for purchase, and ongoing investments in Canada’s steel sector will ensure this availability persists. But it will be for them to decide."
The Search for Specialized Fabrication Yards
LNG Canada defended the decision by pointing to technical limitations within Canada rather than a preference for offshore manufacturing.
"For the plant construction in Kitimat, the challenge is not a preference for offshore steel, but the specialized fabrication capability required for modules of this scale and complexity," LNG Canada spokesperson Paul Hagel wrote in an email to CBC News. "Domestic shipyards and fabrication facilities in Canada lack the capability to build and ship the extra modules demanded for Phase 2."
According to Hagel, only five fabrication yards worldwide possess the necessary space, capacity, marine access, and quality systems for this scope of work. These facilities include COOEC in China.
Shell Canada Leads LNG Canada with Asian Partners
Shell Canada Energy serves as the majority operator and project leader with a 40 per cent stake in LNG Canada. Additional stakeholders include China’s state-owned PetroChina with a 15 per cent share, Malaysia’s Petronas holding 25 per cent, Japan’s Mitsubishi Corporation holding 15 per cent, and the Korea Gas Corporation (KOGAS) holding five per cent. Exported gas from the site is distributed to Asian markets based on these ownership percentages.
Ahead of the Phase 1 final investment decision in 2018, the joint venture requested and received a federal exemption from steep anti-dumping and countervailing duties on fabricated industrial steel from China. The 2019 remission order published in the Canada Gazette indicated that LNG Canada and Singapore investors behind the Woodfibre LNG project in Squamish, B.C., informed the Department of Finance of a domestic production shortfall. Industry representatives argued that tariff costs would negatively impact investment decisions.
Those initial five-year duties have since expired and have not been renewed. LNG Canada confirmed that no tariffs currently apply to imported steel components from its Chinese supplier. The office of Finance Minister François-Philippe Champagne noted that the Canada Border Services Agency determines whether additional levies are necessary to prevent predatory dumping.
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