Speculation that Shell PLC and Mitsubishi Corp. are looking to exit LNG Canada is misplaced, analysts say, with some arguing the reported stake-sale talks could even signal preparations for expansion rather than a pullback.

The companies have so far declined to comment on the Reuters report from earlier this month that the partners were exploring sale options for their stakes in the major

liquefied natural gas terminal in Kitimat, B.C. Global oil and gas major Shell, which holds the largest stake in LNG Canada at 40 per cent, is looking to sell up to three-quarters of its holding, according to the report. Mitsubishi currently holds a 15 per cent stake in the project, with the remaining equity held by Petroliam Nasional Berhad (better known as Petronas), MidOcean Energy LLC, PetroChina Co. Ltd. and Korea Gas Corp.

The news has sparked speculation that the partners may have lost confidence in the project

or are unwilling to invest in LNG Canada’s Phase 2 expansion amid concerns about the project’s economics or the risk of global oversupply.

It comes at a sensitive moment for Canada’s nascent LNG industry, as investors and policymakers are closely watching whether the country can attract capital for a second phase of development.

But several analysts and industry experts cautioned the moves by Shell and Mitsubishi appear aimed at unlocking value and limiting risk, or at bringing in new partners and fresh capital to fund a second phase, rather than reflecting a desire to exit the project.

One executive from a large oil and gas producer in Western Canada said the news is likely a positive signal for LNG Canada’s expansion.

“It’s these project financing deals that often, at the outset, look like a sell-down or an equity sale. Really, it’s just a structured financing,” said the executive, who asked not to be identified because they were not authorized to speak publicly on the matter.

“In preparation for Phase 2, the companies are making sure they have ways to fund it, and they’re funding it at the partnership level, but they’re not selling out of the project.”

Other analysts and industry experts are comparing the news to Petronas’s move last September to sell a portion of its stake in LNG Canada to privately held LNG company MidOcean, a move that was also initially interpreted by many as Petronas stepping back from Canada.

In that case, analysts noted, Petronas sold a 20 per cent stake in its Canadian upstream and LNG holdings to MidOcean, including a portion of its interest in LNG Canada. MidOcean was brought in as a financial partner, earning a share of project cash flows, while Petronas retains operational control and continues to own and market the project’s LNG cargoes.

Some analysts covering Shell have highlighted the liquefied natural gas business and LNG Canada’s strategic importance to the company, suggesting it may be unlikely the company is looking to exit its Canadian investment.

“Shell has a global footprint and it wants to maintain its share of the global LNG market and LNG Canada Phase 2 is probably a part of that,” TD Cowen analyst Jason Gabelman said.

Gabelman said Shell is invested in or developing smaller LNG projects in Qatar, the United Arab Emirates and Oman, but LNG Canada Phase 2 is a much larger project and could be crucial to the company maintaining its position as the world’s top LNG trader.

“It is a much more meaningful project than the others Shell is pursuing,” he said. “They want to grow their LNG footprint over time and LNG Canada Phase 2 is their largest pre-FID option to do that.”

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While investment in Canadian LNG has been slow compared to the rapid build-out of the sector on the U.S. Gulf Coast, Shell and French oil major TotalEnergies have said that Canadian LNG remains competitive thanks to lower upstream gas costs and geographic proximity to Asia.

At the same time, Gabelman noted Shell has highlighted a looming oil supply shortfall in the 2030s, a factor that could be pushing the company to preserve capital for future crude investments, rather than new gas projects.