Shell & Mitsubishi Weigh LNG Canada Stake Sales Amid Expansion Plans

Per Reuters, oil major Shell plc SHEL and Japanese conglomerate Mitsubishi Corp are exploring potential sale options for their stakes in the C$40 billion LNG Canada project. The move comes as the project’s owners consider a possible expansion and follows Petronas’ recent partial exit from the venture.

LNG Canada, located in Kitimat, British Columbia, is one of the most strategically positioned LNG export facilities in North America, with direct access to the Pacific Coast and Asian markets.

Shell held a strong position as a global LNG leader, with LNG Canada’s Train 1 already operational and Train 2 expected to start by year-end, adding significant export capacity. The project enhanced Shell’s ability to capture value through higher liquefaction volumes and optimized trading margins, particularly from favorable pricing spreads between Asia and Europe.

Taking a Look at the LNG Canada Joint Venture Project

The LNG Canada project was originally a joint venture comprising Shell (40%), Malaysia’s Petronas (25%), Mitsubishi Corporation (15%), PetroChina (15%) and Korea Gas Corporation (5%). It stands as the first large-scale LNG project in Canada to begin production and the first major LNG facility in North America with direct access to the Pacific Coast, offering a faster shipping route to Asia’s markets compared with terminals on the U.S. Gulf Coast. However, Petronas sold a fifth of its stake recently, following which these two energy giants also took a bold decision to sell their stake.

Shell Sounds Out Buyers for a Major Stake

Shell, the largest shareholder with a 40% interest, has reportedly been working with Rothschild & Co to gauge investor interest. Sources indicate Shell could sell up to three-quarters of its holding, equivalent to around 30% of the overall project, though it remains open to multiple structuring options.

Shell is said to be evaluating its exposure differently for Phase 1, which is already operational, and the proposed Phase 2 expansion, which carries higher capital and execution risks. One estimate suggests a buyer could face a commitment of roughly $15 billion, factoring in equity, debt and future capital needs tied to Phase 2.

Despite any potential sale, Shell has indicated it would retain a long-term gas supply contract with the terminal, potentially spanning 30 years.

Mitsubishi Hires RBC as Review Begins

Mitsubishi, which owns a 15% stake in LNG Canada, has hired RBC Capital Markets to advise on its options. Sources caution that discussions are still at an early stage, and any formal sale process is unlikely to begin until later this year. It remains unclear how much of Mitsubishi’s stake could ultimately be offered to the market.

Neither Shell nor Mitsubishi has confirmed the deliberations, and all parties involved have declined to comment publicly.

Ownership Changes Follow Petronas Deal

The potential stake sales come shortly after MidOcean Energy, backed by EIG and Saudi Aramco, acquired a fifth of the Petronas-led venture that held a 25% stake in LNG Canada.

Such portfolio reshuffling is common once large infrastructure projects move into the operational phase, allowing developers to recycle capital into new opportunities.

Cost Advantage Tempered by Market Risks

LNG Canada benefits from a structural cost advantage, as Canadian natural gas prices typically trade at a discount to the U.S. Henry Hub benchmark. This makes the project competitive on the global cost curve, particularly for Asian buyers.

However, investors are also weighing concerns about a potential global LNG oversupply, with several new export projects coming online. Recent pauses in other North American LNG developments highlight the caution creeping into the market.

Operational challenges have also emerged. While LNG Canada began production in June, its second processing unit, Train 2, experienced an outage in December, just weeks after startup.

Expansion Decision Looms

When fully ramped up, Phase 1 of LNG Canada is expected to export 14 million metric tons of LNG annually. Partners are working toward a final investment decision on Phase 2 as early as this year, which would double the facility’s capacity.

For Shell and Mitsubishi, any stake sale would mark a strategic rebalancing — monetizing a mature asset while maintaining exposure to LNG growth in a market that remains central to global energy transitions.

SHEL’s Zacks Rank & Key Picks

London-based Shell is one of the primary oil supermajors — a group of U.S. and Europe-based big energy multinationals with operations that span almost every corner of the globe. Currently, SHEL has a Zacks Rank #3 (Hold).

Investors interested in the energy sector may consider some top-ranked stocks like Cenovus Energy Inc. CVE, Oceaneering International, Inc. OII and TechnipFMC plc FTI. While Cenovus Energy and Oceaneering International currently sport a Zacks Rank #1 (Strong Buy) each, TechnipFMC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Cenovus Energy is a leading integrated energy firm. The company’s operations comprise marketing the produced oil, natural gas and natural gas liquids. The Zacks Consensus Estimate for CVE’s 2025 earnings indicates 26.2% year-over-year growth.

Houston, TX-based Oceaneering International is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. The Zacks Consensus Estimate for OII’s 2025 earnings indicates 76.3% year-over-year growth.

Newcastle & Houston-based TechnipFMC plc is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The Zacks Consensus Estimate for FTI’s 2025 earnings indicates 24.7% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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