Shell-led LNG Canada is set to initiate Train 2.

Shell-led LNG Canada has started the process of launching its second liquefied natural gas processing unit, Train 2, in Kitimat, British Columbia, as reported by a company spokesperson to Reuters on Thursday. However, this startup is occurring while the company faces ongoing technical issues with Train 1, which had problems reported in July, shortly after it began production.

LNG Canada is the first significant LNG export facility in Canada and the first on North America's west coast, providing direct access to Asia, the largest LNG market in the world. The facility took nearly seven years to build and has been operating at less than 50% of its capacity, according to sources.

"We had to replace the supercore, and while Train 2 is operational, Train 1 is not," one insider informed Reuters. In response to inquiries about the technical difficulties, the spokesperson highlighted the continued export activities at the terminal and noted that flaring, which began on September 11, has since concluded.

"A 14th cargo left the LNG Canada facility on September 30, with a 15th expected to depart soon," the spokesperson stated. In September, LNG Canada exported less superchilled gas than in the previous month, with only four cargoes totaling under 0.3 million metric tons, compared to 0.4 million tons in August, based on preliminary ship tracking data from financial firm LSEG.

Once fully operational, the facility should convert about 2 billion cubic feet of gas per day into LNG, which market participants hoped would elevate Canadian natural gas prices. However, the slow ramp-up of LNG Canada has contributed to a decline in daily spot prices to record lows, failing to reduce a gas surplus anticipated to meet increased demand from the plant, leading to pipeline congestion.

Gas storage levels in Western Canada remain at last year's peak, according to investment bank Jefferies, and some gas producers are reportedly reducing output aggressively to alleviate the ongoing surplus. LNG Canada is a partnership involving Shell, Malaysia's Petronas, PetroChina, Japan's Mitsubishi Corp, and South Korea's KOGAS.

On Tuesday, MidOcean, an LNG company supported by EIG and Saudi Aramco, announced plans to acquire a 20% stake in the Petronas venture, which holds a 25% share in LNG Canada.