LNG Canada hits startup challenges amid production ramp up, sources say

LNG Canada's first liquefaction train is operating at about 50% capacity headed into August as the operator works to resolve issues with a turbine and a refrigerant production unit, market sources told S&P Global Energy.

The issues were believed to be short-term, with a fix expected within weeks, two market sources said. The 14 million mt/year Shell-led project exported its first cargo on June 30, launching Canada as an LNG supplier and opening its vast gas reserves to the global market.

"I heard it is slightly delayed [from the fifth] cargo onwards," an LNG trader said.

"The issue sounds serious from what I hear but not sure on exact timeline could be one week or even two," a second trader said.

A third market source said they expected a brief pause in exports due to production ramp issues and that one ship had diverted course away from the facility. The source said it was unclear how significant the startup issues were and that there may not be a major impact on output.

LNG Canada had exported four LNG cargoes as of July 30 from the plant in remote Kitimat, British Columbia, S&P Global Commodities at Sea data showed. The most recent, the PetroChina-chartered Wudang, departed July 24 and was underway in the Pacific Ocean July 30 headed for Asia.

The diverted vessel, the Shell-chartered Ferrol Knutsen, had been headed to Kitimat before changing its destination to Peru on July 26, CAS data showed.

LNG Canada did not respond to requests for comment on July 30.

Reuters previously reported on the startup challenges.

Total deliveries to the LNG Canada project are not publicly visible, but Energy analysts believe the facility's feedgas demand is slightly less than 50% the full capacity of Train 1, at around 400-500 MMcf/d.

When the two-train project is complete, feedgas demand is expected to reach closer to 2.2 Bcf/d. The second train is expected to reach commercial operations in early 2026.

LNG Canada operator Shell has the largest stake in the project with 40% and will also be the largest offtaker. Joint venture partners include Malaysia's Petronas, PetroChina, Japan's Mitsubishi and South Korea's Kogas.

Western Canada prices

Beyond expectations around the LNG Canada startup, high natural gas production in Western Canada and inventories that remain above average are also putting pressure on prices in the region, Energy analyst Nikolay Filchev said.

The price has averaged about 36 cents/MMBtu in the second half of June, compared to about 86 cents/MMBtu in the first half of the month.

Across the Pacific, Platts assessed the September Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, at $12.132/MMBtu on July 30, up 2.33 cents/MMBtu from the prior assessment.