B.C. Premier David Eby, Nisga'a Nation President Eva Clayton and Nisga'a CEO Andrew Robinson at a September announcement about the Ksi Lisims LNG project.ETHAN CAIRNS/The Canadian Press
Anil (Andy) Hira is a political economist and professor at Simon Fraser University and the director of the Clean Energy Research Group.
The geopolitical instability from the war in Iran is creating what may be the largest oil and gas supply disruption on record. Many are looking to Canada and to Prime Minister Mark Carney for deliverance, particularly by fast-tracking major projects of national interest to export our energy.
One initiative that made the list is the Ksi Lisims liquefied natural gas project in British Columbia. On Tuesday, it hit another milestone: The Globe and Mail reported that Ottawa was set to announce a plan to effectively sell liquefied natural gas to Germany using Ksi Lisims.
Planned Ksi Lisims LNG project reaches financial deal with Germany’s SEFE
However, the project has not yet attracted the many billions in private investment needed. This deep shortfall, along with numerous other hurdles along the way, raises the likelihood the federal government becomes the investor of last resort, putting Canadians on the hook.
Already, almost $4-billion in federal and provincial government funding has been committed to LNG development. LNG Canada, also in B.C., received a $40-billion capital investment, including the $14.5-billion Coastal GasLink pipeline that cost more than twice the original estimate and took seven years to get from final investment decision to operations.
The same financial uncertainties hold true for Ksi Lisims. The project is estimated to cost $26-billion, nearly three times the initial estimate. Proponents anticipated making a final investment decision in early 2026, after missing the 2025 target. But the turmoil in the Middle East is not expected to translate into enough interest from LNG buyers.
It is unclear how much the German buyer, the state-owned Securing Energy for Europe, wants from Ksi Lisims. But it is unlikely that it would buy all of the 70 per cent of projected capacity that is still unspoken for.
Ksi Lisims LNG would be constructed, owned and operated by Texas-based Western LNG, a company with no existing projects or assets. The project faces two separate federal lawsuits by the Lax Kw’alaams Band and the Metlakatla First Nation, and lacks consent from nearly half the Indigenous groups consulted by the province, creating further legal uncertainty. The Prince Rupert Gas Transmission pipeline – required to supply gas to the facility – faces two provincial legal challenges of its own.
An additional liability is that Ksi Lisims LNG is proposed as a floating asset, meaning Western LNG – in its capacity as sole owner – can theoretically redeploy the facility to another jurisdiction if market or regulatory conditions change. In this case, Canadian taxpayers would fund an American-owned asset that could be moved to where LNG drilling is cheaper and ramping up.
Beyond cost overruns, the risk inherent in these investments is projecting what the LNG market will look like over the multidecade payback period. Ottawa and British Columbia are taking significant financial risks in the hopes global LNG markets will, decades from now, justify the scale of investments, while also offsetting electricity subsidies.
Despite becoming an LNG exporter last summer, British Columbia continues to miss revenue projections for natural gas royalties, an indication that the payoff from taxpayer investments is not borne out by experience. In 2025-26, for example, projections were 19 per cent above actual royalties.
Beyond overoptimistic forecasts, the B.C. government has yet to perform a transparent cost-benefit analysis of royalties compared with all of the indirect and direct subsidies the oil and gas sector receives.
While the war in Iran may seemingly raise LNG profitability in the short term, the challenge is the supply glut coming on the market, and the probability that Gulf producers will be back online before large Canadian projects are operational.
Regardless, the temporary supply gap will more than likely be replaced by new pipelines from Russia and central and Southeast Asia to China; and from Azerbaijan, Norway and north Africa to the European Union. LNG is only competitive with pipelines when it is shipped over extremely long distances – several thousands of kilometres – which is not the case for the EU or China, as closer pipeline suppliers are available and two to five times cheaper.
The next project of national interest should not require allocating billions in more taxpayer dollars for another LNG project, but provide the investment needed to rapidly scale up Canada’s solar, geothermal and wind production and clean electricity capabilities. These industries are more likely to produce the jobs and income Canadians need as the oil and gas sectors sunset.