Gas Fever & Coal Chills

WESTERN EUROPE

Europe's newly discovered riches of natural gas are creating a major upheaval in the world's fastest growing energy market. Across the Continent, the new gas finds are lighting an investment fever and bringing some chills to a vulnerable competitor, coal. As estimates grow of the size of The Netherlands' mammoth Groningen gas field (widely regarded as twice the official 1.1 trillion cubic meters), and as oilmen probe the bottom of the North Sea for what may be even larger deposits--one big one was hit last week off the West German island of Borkum--gas is becoming Europe's new glamor fuel.

Mountains of Stoves. Last week seven of the world's most prestigious investment houses--including Manhattan's White, Weld & Co., both the London and Paris Rothschilds and West Germany's Deutsche Bank and Dresdner Bank--formed a Luxembourg-based company called Pipeline Finance to raise as much as $1 billion over the next eight years to bring the new fuel to European households and industry. For the small investor, a consortium of British, Dutch, German and Belgian banks has just created an open-end mutual fund, Intergas, that offers participation in the oil, equipment, transport and construction companies that are already starting to profit from the gas boom.

With Shell Oil and Esso, West Germany's Thyssen steel interests two weeks ago formed a new company, Thyssengas A.G., to import Dutch gas by pipeline and expand its market in the industry-rich Ruhr by vigorous price cuts. In The Netherlands, the Gasunie marketing combine expects a complete changeover by household gas users to natural Groningen gas by the end of 1966. Because natural gas yields twice as much heat as manufactured gas--and thus requires less gas for the same task--most appliances must be scrapped or substantially modified in the process. One result: mountains of discarded stoves and ovens are piled up outside many a Dutch town.

Natural gas has expanded its toehold in Europe's fuel market from 2% to 3 1/2% in the last two years; most experts predict that it will grab at least 10% by 1975, chiefly at the expense of coal's present 47% . Gas's share could grow twice that fast--to 20%--if it is priced low enough. Up to now gas prices have been kept close to those of rival fuels, partly because coal and oil companies own major interests in many gas-distribution combines and partly because so many governments are committed to subsidizing inefficient coal production.

Millions for Subsidies. Though sales are falling and unsold stocks of coal above ground have doubled in the last seven months, the West German government last week bowed to election-year pressures and decided to increase subsidies to its faltering coal industry, which already receives more than $150 million a year in subsidies. If the European Coal and Steel Community approves, Bonn will pick up another $11 million tab this year in order to let miners spend part of their time at repair work instead of digging, will guarantee $60 million in bank credits to buy surplus coal and spend $40 million more over four years to store it.

Amid such protectionism, natural gas is unlikely to be allowed to steal coal and oil markets by means of price wars. But at least gas should place a ceiling over fuel costs on the Continent--which in itself would be an event of considerable consequence. With Europe's historic surplus of cheap labor gone, developing cheap fuel looks like the most promising way to help the Continent keep its industrial products priced competitively in the world's markets.

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