Canadian natural gas producers will cut their losses this year but still show red ink on their books, an Ottawa business research agency said Thursday.

A survey by the Conference Board of Canada forecasts 2016 pre-tax gas losses of C$1.6 billion (US$1.2 billion), a modest improvement from a 2015 total of C$1.7 billion (US$1.3 billion).

“The industry's fortunes are expected to turn around starting next year, with profits approaching C$1 billion (US$770 million) by the end of the decade,” the report said.

Rather than price increases, the board identifies market expansions with reduced pipeline tolls and liquefied natural gas (LNG) exports as the recovery drivers for the Canadian gas supply sector.

TransCanada Corp. started the revival rolling Thursday by offering toll discounts as deep as 47% on its national Mainline in exchange for 10-year delivery contract commitments (see related story).

Efforts to put Canadian gas on the international LNG market with 25 export terminal proposals on the Pacific and Atlantic coasts can still succeed if sponsors control costs and governments provide timely project approvals, the conference board said.

The board reported its surveys of international conditions show that after adding up to US$200 billion over the past 10 years, global LNG production investment will drop by 40% per year down to an annual US$4 billion as of 2020.

The board points out that at the same time, the International Energy Agency forecasts global LNG demand growth of 3% per year, requiring investment of US$15 billion per year by established exporters if they want to keep all the market.

Recent approval of the Asian entry in the export terminal lineup on British Columbia’s northern coast, Pacific NorthWest LNG (see Daily GPI, Sept. 28), makes Canadian production a contender for global market growth.

The sponsor consortium, led by Malaysian state energy conglomerate Petronas through Calgary subsidiary Progress Energy, has begun “a total project review” and set no date for making a final investment decision.

BC Natural Gas Development Minister Rich Coleman told a Calgary conference Wednesday that his government is optimistic about Pacific Northwest LNG and will enter discussions with the consortium as early as the coming weekend.

Conference board economist Carlos Murillo called the project approval “a positive development for the industry. But he said any significant anticipated surge in industry output stemming from this decision is still years away."