This story has been updated. It previously stated incorrectly that Ksi Lisims is Indigenous-owned. The project is in fact a wholly-owned subsidiary of Texas-based Western LNG.

The Ksi Lisims liquefied natural gas (LNG) project in British Columbia faces major local risks and global market uncertainty that could derail its success, a new report warns.

With these challenges factored into financial projections, it is “highly unlikely” that the floating gas liquefaction and export terminal can be delivered on budget, the Institute for Energy Economics and Financial Analysis (IEEFA) writes in the report.

Planned for B.C’s northern coast, Ksi Lisims would export 12 million tonnes of liquified natural gas per year, supplied by the approved—but not yet built—Prince Rupert Gas Transmission (PRGT) pipeline. Though frequently referred to as ‘Indigenous-owned’—including by B.C. Premier David Eby—Ksi Lisims Tolling LP is actually one of two “wholly-owned subsidiaries of Western LNG LLC” formed in 2021 for the project, states an overview submitted to B.C.’s environmental assessment office. The facility is sited on Nisga’a First Nation lands—and Western LNG says the project is being co-developed with the Nisga’a government and Rockies LNG.

Nisga’a First Nation co-owns the PRGT pipeline with Western LNG after ownership was transferred from TC Energy in 2024.

But Ksi Lisims—which is undergoing environmental assessments and seeking regulatory approvals ahead of a final investment decision—faces basic structural hurdles, including challenges to the gas pipeline it depends on. Last November, Gitanyow Hereditary Chiefs declared plans for an Indigenous Protected and Conserved Area (IPCA) to block the PGRT pipeline’s route over environmental concerns. The pipeline also crosses rugged terrain and sensitive marine areas, adding engineering and regulatory hurdles, says IEEFA.

Challenges like these significantly affect Ksi Lisims’ financial prospects, suggests IEEFA’s analysis.

The project’s dependence on the PRGT pipeline for feed gas is a key risk, the report states. B.C. has just recently confirmed that the pipeline permit is viable after it expired last November, but some First Nations have legally challenged it, alleging inadequate consultation and environmental review. Protests led by the Gitananyow Hereditary Chiefs could add costs, as with past megaprojects like the Coastal GasLink pipeline, writes IEEFA.

Ksi Lisims’ developers say they will reduce emissions by powering the facility with renewable hydropower from the B.C. grid, and are targeting net-zero operations. But IEEFA cites uncertainty about securing BC Hydro’s electricity supply as another layer of risk, imperilling the facility’s net-zero ambitions and thus its regulatory compliance.

“Without hydroelectricity, Ksi Lisims LNG will have to rely on gas-powered turbines which increase project capital costs by approximately C$2 billion,” adds IEEFA. The project partners have yet to finalize an agreement with BC Hydro to connect the facility to the North Coast Transmission Line. Meanwhile, other upcoming LNG projects in the province are competing for the same grid capacity.

Net revenue is also questionable given the lack of LNG takers, IEEFA writes, estimating that about 70% of planned production has no dedicated buyer. The twin floating LNG barges planned for the terminal face higher operating costs in harsh marine environments, are largely “unproven in Canadian waters,”  and will provide few local jobs.

And by the time Ksi Lisims would start supplying LNG—its targeted completion date is in 2029—many similar projects are due to come online across the world, creating a global glut, IEEFA writes.

This oversupply could align with weakening demand—as expanding clean energy capacity and tighter emissions regulations lead to structural declines in LNG use.

Evolving domestic markets could also undermine success, as competition for gas as a feedstock within Canada limits the volumes available for export.

“While project developers praise its potential economic benefits, the viability of the Ksi Lisims project depends on its ability to overcome cost pressures, secure firm purchase commitments, and navigate a highly competitive global LNG market amid uncertainties about demand trends,” writes IEEFA.

“At this point, both the project and Canada’s broader LNG ambitions remain vulnerable to formidable headwinds.”