Canada LNG Exports Rise as Middle East Conflict Tightens Global Supply

Canada’s LNG Ambitions Clash with Global Realities

Canada is poised to increase its liquefied natural gas (LNG) exports in the coming years, driven by escalating geopolitical tensions in the Middle East and resulting global supply shortages. However, the country is likely to fall significantly short of the federal government’s ambitious long-term goals for LNG production, according to industry analysis.

Prime Minister Mark Carney and Energy Minister Tim Hodgson have publicly stated a desire to see Canada exporting 50 million tonnes of LNG annually by 2030, with a longer-term vision of reaching 100 million tonnes per year by 2040. These targets, however, are increasingly viewed as optimistic given the complexities of infrastructure development and the evolving global energy landscape.

The recent escalation of conflict involving Iran has dramatically reshaped the LNG market. Prior to the February 28th attacks by the United States and Israel, approximately one-fifth of the world’s oil and LNG supplies transited the Strait of Hormuz, a critical chokepoint now effectively closed to marine traffic. Compounding the supply concerns, Qatar, the world’s second-largest LNG exporter after the U.S., halted production in early March following Iranian attacks on its Ras Laffan LNG hub, sustaining significant damage.

Rystad Energy estimates that as much as one-fourth of Qatar’s projected 2026 LNG production could be disrupted, impacting major buyers in China, India, and Pakistan. Industry experts, like Jason Feer, global head of business intelligence at Poten & Partners, warn that even a resolution to the immediate conflict will have lasting effects on LNG supply and pricing, as buyers factor in the increased vulnerability of Gulf energy infrastructure.

First Movers and Future Capacity

LNG Canada, the nation’s first LNG export terminal located in Kitimat, British Columbia, began shipping to Asia last June. While a significant step, Canada currently ranks 19th among 24 LNG exporting nations and remains the world’s fifth-largest producer of natural gas. The facility’s initial output has been ramping up, with 60 cargoes shipped to Asia as of Tuesday, March 18, 2026.

The situation has spurred increased activity in British Columbia. Woodfibre LNG near Squamish, with a capacity of 2.1 million tonnes per year, and the Haisla Nation-led Cedar LNG in Kitimat, planning to export up to 3.75 million tonnes annually, are both under construction. The Ksi Lisims LNG project, backed by the Nisga’a Nation, aims to ship 12 million tonnes a year to Asia.

Combined with LNG Canada’s Phase 1 capacity of 14 million tonnes per year, these projects could bring Canada’s total export capacity to approximately 32.85 million tonnes annually by 2030. A potential Phase 2 expansion of LNG Canada, which would double the Kitimat facility’s capacity, could push total exports to 47.85 million tonnes by the early 2030s.

Challenges and Uncertainties

Despite the potential for growth, significant hurdles remain. The federal government’s ambitious target of 100 million tonnes per year by 2040 appears increasingly unrealistic. A recent report by the Canada Energy Regulator suggests that Canada’s LNG exports will likely range between 32 million and 51 million tonnes annually by 2040.

The report did not specify which projects would enable this increase, highlighting the uncertainties surrounding future investment, and development. Climate advocacy groups argue that focusing on LNG exports will hinder the global transition to renewable energy sources.

While the federal government has fast-tracked LNG Canada’s Phase 2 expansion and designated Ksi Lisims as a project of national interest, the economic viability of exporting LNG to Europe remains questionable. Canada’s LNG export capacity is projected to plateau around 50 million tonnes per year throughout the 2030s.

The current global supply disruptions, triggered by the conflict in the Middle East, have undoubtedly elevated Canada’s strategic importance as an LNG supplier to Asian markets. However, realizing the full potential of Canada’s LNG resources will require sustained investment, streamlined regulatory processes, and a realistic assessment of the challenges ahead.