Liquefied natural gas (LNG)

The opportunity

Canada is positioning itself as a leading global supplier of liquefied natural gas (LNG), supported by growing demand worldwide for reliable sources of natural gas. Momentum has continued to build in 2026, with the federal government advancing a supportive policy environment, including through the establishment of the Major Projects Office (MPO).

Canada is the world’s fifth-largest producer of natural gas, and investor interest and confidence in the country’s LNG market is growing. Canada became an exporter of LNG in mid-2025 when Phase 1 of the LNG Canada Project, located in British Columbia, began exporting to Asian markets.

A final investment decision by the joint venture participants on Phase 2 development is expected by the end of 2026. The proposed Ksi Lisims LNG project is also anticipated to make a final investment decision in 2026, and will become Canada’s second-largest export facility if constructed. Two other LNG facilities, Cedar LNG and Woodfibre LNG, are currently under construction in British Columbia.

For investors and for Canada, the current landscape presents a significant opportunity and, potentially, a finite window to act.

Market entry and investment strategies

Joint ventures and partnerships. The most prominent model for large-scale LNG investment in Canada is the multi-party joint venture (JV) with strategic equity participation from global energy companies. As an example, LNG Canada is a JV comprising five global energy companies. General and limited partnerships are other co-venture arrangements that LNG proponents have used to structure their projects. JV and partnership models enable risk-sharing across the capital-intensive development cycle, while facilitating alignment of upstream supply commitments with downstream offtake. Another current example is the Ksi Lisims LNG, a three-party collaboration among the Nisga’a Nation, a US-headquartered LNG project development company, and a consortium of Canadian natural gas producers.

Offtake and tolling arrangements. Other investor access pathways to Canada’s LNG market are long-term offtake agreements, and liquefaction and tolling arrangements. For example, two German energy companies signed separate offtake agreements with Ksi Lisims in the spring of 2026, and Cedar LNG is supported by long-term liquefaction and tolling services arrangements with three significant upstream producers of Canadian natural gas; all three upstream producers will have access to Cedar LNG’s export capacity. In addition, the Woodfibre LNG project is underpinned by three long-term offtake agreements with an international supermajor, representing 100% of the project’s liquefaction capacity.

M&A. Several international energy companies have recently acquired Canadian upstream natural gas assets which are expected to supply the acquirers with feedstock for their LNG investments, including to LNG Canada. One of these transactions involved the indirect acquisition of a portion of a JV partner’s stake in LNG Canada. We anticipate seeing more deals for Canadian natural gas assets and LNG interests that follow similar models.

Financing and investor support

The market reflects a mix of equity and debt financing approaches. For example:

• LNG Canada is equity-financed by its JV participants, while the individual participants have flexibility to pursue distinct financing and capital investment arrangements.
• Cedar LNG will be project-financed with debt. The project is expected to be funded with asset-level debt financing for approximately 60% of the project cost. The remaining approximately 40% of the project costs is expected to be financed through equity contributions from both partners¹.
• Each of the two project partners of Woodfibre LNG will make pro-rata contributions during construction through a combination of asset-level debt financing and equity investments.

Key risks and how to manage them

Regulatory and permitting risk

Regulatory uncertainty has historically been the greatest deterrent to LNG investment in Canada. Previously proposed LNG projects have not advanced beyond the early development stage, at least in part due to extended regulatory timelines and approval conditions that challenged project economics. The federal government established the MPO to help address this. In May 2026, the federal government announced a series of ambitious reforms to accelerate the federal approvals regime. The Ksi Lisims Project and Phase 2 of LNG Canada have been referred to the MPO for potential consideration as projects of national interest.

Court challenges and litigation

The risk of judicial review and Indigenous rights litigation is a material consideration for any major project in Canada, including for LNG projects and the associated pipeline infrastructure. Investors can mitigate this risk through meaningful Indigenous engagement, economic benefit negotiations, and the identification of partnership opportunities as early as possible in the development process. Projects with strong Indigenous support, including in some instances direct equity ownership, are better positioned to withstand legal challenges.

Foreign investment review

The Investment Canada Act requires review of acquisitions by non-Canadians that exceed certain value thresholds (with lower thresholds applying to state-owned enterprises), including a national security review process. LNG projects are increasingly being viewed by federal and provincial governments as strategic Canadian assets; therefore, they may attract added foreign investment scrutiny. Structuring LNG investments as greenfield JVs or partnerships, and ensuring alignment with Canada's nation-building energy agenda and export market diversification strategy, can reduce foreign investment review risk.

Indigenous partnerships

Indigenous economic participation has become a key driver of LNG project viability in Canada. Projects with meaningful Indigenous equity participation are more likely to face lower risks of costly litigation, secure timely approvals, and advance through the development process with fewer delays. For example, Nisga’a Nation has an equity stake in Ksi Lisims; the Haisla Nation holds 50.1% of Cedar LNG; and LNG Canada recently announced the potential majority acquisition by a consortium of Indigenous groups of an LNG storage tank to be constructed as part of LNG Canada’s Phase 2.

In negotiating Indigenous equity arrangements, building trust through culturally respectful interactions is crucial. Indigenous investors will expect fulsome communication and genuine partner-level engagement, including regular meetings, access to project information, and, potentially, involvement in formulating and implementing strategies to mitigate project impacts on Indigenous communities and rights.

Creative financing solutions are also often required in considering how capital funding will be addressed over the life of a project, given that access to capital can be a barrier to Indigenous economic participation. Federal and provincial loan guarantee programs, including through the Canada Indigenous Loan Guarantee Corporation, may be available in certain circumstances, and these programs can help Indigenous communities participate in resource and infrastructure developments, including LNG. Indigenous investors can also be expected to seek to ensure their investments create minimal financial risk and lead to predicable economic returns for their communities.