LNG Canada is expanding its Kitimat, B.C. operations with a $33-billion investment to double production capacity. The project will rely on Chinese steel modules because domestic yards lack the necessary scale.
The $33 billion push to 28 megatonnes
LNG Canada has committed to a Phase 2 expansion in Kitimat, B.C., that will increase the facility's output from 14 to 28 megatonnes per year. This growth involves the addition of two new liquefied natural gas processing units, commonly called trains, which will bring the total count at the site to four. Once completed, likely in the early 2030s, the site is expected to become the second-largest facility of its kind globally.
The expansion includes the construction of a new loading berth, a condensation tank, and an additional LNG storage tank. according to Mark Carney, the project is designed to link Canadian energy resources more effectively with global markets while generating thousands of employment opportunities during the construction phase.
Why COOEC remains one of five viable global suppliers
The specialized modules for the Kitimat expansion will be manufactured by the state-owned China Offshore Oil Engineering Co., Ltd. (COOEC). A company spokesperson told CTV News that no Canadian fabrication yards possess the capacity to build and ship the necessary modules. The company claims that only five yards worldwide have the required combination of marine access, quality systems, and physical space to handle a project of this magnitude.
Because these modules are too large to be transported by road, they must be built at a facility with direct tidewater access. COOEC, which also built the first two trains currently operating at the Kitimat site, will ship the components by sea to be integrated into the existing plant infrastructure.
The $1 billion exemption and the tariff loophole
The use of Chinese steel for the project has a history of federal financial concessions. Prior to the 2018 final investment decision for Phase 1, the LNG Canada joint venture—which includes Shell Canada Energy, PetroChina,Petronas, Mitsubishi Corporation, and KOGAS—received an exemption from anti-dumping and countervailing duties. This specific concession was estimated to be worth $1 billion.
Current trade barriers do not appear to hinder the Phase 2 expansion. LNG Canada told CBC News that there are currently no tariffs on the steel components being imported from its Chinese supplier. The office of Finance Minister Francois-Philippe Champagne noted that the Canada Border Services Agency has not imposed additional levies because these specific components do not directly compete with products manufactured by Canadian steel producers.
Coastal GasLink’s 15,000-tonne Canadian steel benchmark
While the massive modules are coming from China, other parts of the infrastructure are utilizing domestic materials. Coastal GasLink is currently targeting the use of nearly 15,000 tonnes of steel from Canadian mills and suppliers. This represents roughly 70 per cent of the steel needed for new compression stations along the pipeline network leading to Kitimat.
This domestic sourcing stands in contrast to the module fabrication. In September 2025, Mark Carney suggested that ambitious building projects would be central to a new "Buy Canadian" policy. However, the reliance on COOEC for the primary processing trains suggests a significant gap between policy aspirations and the actual industrial capabilities of Canadian fabrication yards.
Will the federal government mandate domestic steel for Phase 2?
A primary uncertainty remains whether the federal government will eventually require Canadian steel for the Phase 2 modules despite the current lack of domestic capacity. While Mark Carney has stated there will be opportunities to buy Canadian and a desire to invest in the domestic industry, the government has not issued a formal requirement for the modules.
It remains unclear how the government intends to reconcile its "Buy Canadian" goals with the reality that only five yards globally can perform this work. Furthermore, the project's timeline remains dependent on favorable market conditions and regulatory approvals before the first LNG from the expansion is produced in the early 2030s.
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