The Montreal Star from Montreal, Quebec, Canada • 83

Vwrv- qs- -xJJBWjiV rvw mapj-l 'i WZfUtiCJir JFW1 Business today Section WEDNESDAY SEPTEMBER 25 1974 PAGES F-l to F-10 Economy to gain steam in 1975 The North Sea bonanza all began uith natural gas in The Netherlands in the mid-fifties Business editor Gibbens describes hoic natural gas now suit-plies 90 per cent of the British grid Natural gas over coal be a problem as will strikes and capital investment i n-tons will not be fully realized However an increase of about 10 per cent is likely By contrast the weakest sector will be housing said Amery Exports should stop declining around the end of this year and might advance at a modest three to four per cent during 1975 Growth of corporate profits will likely be non-existant during next year There will only be a slow winding down in the rate of inflation with little relief in consumer prices to be expected until the second half of 1975 when crop conditions may improve said Amery As for interest rates Clendenning foresees a modest decline in short term rates which in 1975 should be reinforced by the gradual shift towards an easier monetary stance By the end of the year further declines might be possible if there is a weakening in inflation Long term rates are another thing Strong financing demands could push them to a new peak in early 1975 and high inflation rates may keep them there A plateau should be reached in 1975 and declines would only occur if the inflation outlook improves The stock market has already discounted an economic and in fact has probably overdone it said Clendenning Recovery will likely be slow and uneven during the first half of 1975 but this could be followed by a stronger upswing In the last half if interest rates dedinefurther and domestic recovery gets under way However Clendenning warned his audience present economic conditions are far from ideal for forecasting and the forecast he was giving them was least two days By NOEL WRIGHT Slow growth for the balance of 1974 and into next year with inflation a continuing problem but with some improvement towards the end of 1975 on both counts the projection from a couple of economists who stack their necks out yesterday for the Montreal Economics annual forecasting session Wayne Clendcnning economic advisor to Richardson Securities even predicted a prime rate in the 94114 range by mid-1975 and 8 Vs to 9 by the year end Anthony Amery of Du Pont of Canada argued thattheCanadian economy should advance at about a four per cent rate during 1975 slower than the' post war average of five per cent but better than many countries the US Contributing factors to slow growth will be sluggish export sales highly volatile labor market conditions and reasonably restrictive monetary and credit conditions Nevertheless unless there is an unanticipated change in economic policies Canada is not heading into a recession and the pace of growth will pick up in the second half of 1975 Spending up Although consumers are nervous about inflation consumer i-tures could rise by 4 to 45 per cent next year However the most dynamic sector of the economy is likely to be business Spending on new plant and equipment have embarked on a major program of capital expenditures and according to federal government sources there is as yet no evidence to suggest that these plans are being said Amery Labor and materials shortages will Sea gas are on East Coast ing in from the North Sea and the biggest bulge will come in 1976-77 with the connection of the Frigg field in the Northern area on the median line between the British and Norwegian sectors The gas will come in by pipeline south of the Shct lands and the Orkneys to the St Fergus Terminal north of Aberdeen Work is now in progress on the undersea pipeline and on the overland connectxn running down between Glasgow and Edinburgh and linking up with 1 the existing system near Newcastleinthe East and Manchester further West Further new discoveries have been made in the British sector of the North Sea above the Forties oil field and on the Norwegian side in ihe same area The first preliminary show has been revealed in the Celtic Sea British Gas officials estimate reserves at 35 years now assuming current levels of consumption and believe confidently these can be almost doubled in the next phase of exploration and development There is an unusual ground swell of confidence at headquarters Personnel are and aggressive in their attitudes a far cry irom the gas industry of 20 years ago They are determined to sell their gas at competitive rates and to build industrial volume with care They have sold their expertise to Europe and other countries and have joint coal-gasification research projects with the Americans and Trans Canada Pipelines They regard the American crash program on coal gasification will some envy British industry and the housewife complain at the rising prices but it would be folly to go on selling natural gas at subsidized levels It is too valuable a commodity Thus one hike earlier this year allowed bythegov- Gas from coal British Gas Corp has connected its pilot-plant for making synthetic natural gas to its Scottish distribution system The pilot-plant upgraded the German Lurgi process to convert low-grade coal Into gas chiefly methane with a high heating value The project Is backed by Continental Oil of the US and a group of American utilities plus TransCanada Pipelines The plant can produce 25 million cubic feet of gas daily Other coal gasification processes are also being developed Big bank shaves prime toll3A pc the Morgan Guaranty move but The drama of international interest Main entry point for North eminent under Price Code will be followed by' another this fall In a period of energy shortage people must pay a real market price for what is available if worse distortions are to be avoided the Gas Corporation argues This may well add to inflationary fires but offsetting action has to come from Government in another area of theeconomy The first natural gas from the British sector of the North Sea was brought ashore in 1967 after a major exploration and development effort by the former Gas Council and the international oil companies sparked by the Dutch ro i ng Fields Reserves are estimated at over 100 trillion cubic feet around the UK or four limes the gas required to' justify construction of the Polar Gas pipeline from the Arctic to Toronto and Montreal The first gas found at West Sole in 1964 will be remembered for a long time the Sea Gem jack-up rig was lost when it collapsed during a move to a new location and 13 men lost their lives That was the first of four rigs lost in the North Sea exploration rush The London housewife as does her Canadian counterpart regards ral gas as a humdrum fuel But its availability over the next 30 to 50 years is a key plank in UK energy planning Britain with most other Western nations has made serious errors of judgment over energy in the past decade Because Jffid-East oil was cheap and ps could be brought ashore relatively cheaply coal production was allowed to run down by 50 per cent No one really wanted to see men going down underground to dig coal It was policy to run down the coal industry all over Europe The idea was to replace coal in industry and in homes with cheap oil and gas Then came the Yom Kippur war last October and the quadrupling of oil prices wrenching energy economics apart Oil and ps could no lonpr be cheap whether supplies came from the Middle East or from domestic sources For balance of payments reasons oil imports had to be cut back by 10 per cent or so for two years till the oil could be brought ashore from the North Sea Demand for gas and coal soared (Coal accounts for 60 per cent of the electri- cal power produced in Britain) The magic rule But the miners wanted more money ami struck Coal stocks ran down to dangerous levels The gas distribution system couldn't handle any more If another energy crisis breaks out this winter gas is more confident of its role But coal remains a question mark as long as some sections of the union refuse to accept the National Coal new pay incentive scheme Nationalisation of North Sea oil and gas? Or maximising government revenues through the tax system for redistribution? The Labor party in its election manifesto for October 10 has made clear that the Gas major interests in the producing gas fields will count towards the magic 51 per cent ownership rule takes from LONDON The suburban housewife pointed to her gas-stove with an offhand gesture burns hotter than the old coal gas and you have to put an asbestos pad underneath the pan sometimes It smell so badly I like natural gas but putting up the price again And look at the stove i's tinny compared with my old casl-iion-framc On the other side of the kitchen stood a as-fired boiler for the central-heating system automatically-controlled This was a modest-priced home But had Ihe North Sea gasfields not been developed in the early sixties she would have been paying a lot more for her cooking fuel and her stove would still be that heavy 30-year-okL The coal gas would have smelled heavily and would have been dangerous for the children And last crunch would have been a killer no central heating The gas comes In mainly from the southern North Sea area through pipelines into such terminals as Easing Thcddlethorpe and Bacton supplemented by liquefied supplies from Algeria via the Canvey methane terminal near London Natural gas accounts for around per cent of British gas demand now up from virtually zero a decade ago when they first began bringing in liquefied gas from Algeria by ship Don't underprice As the proportion of natural gas has climbed so that of coal-based and oil-based gas has declined The British Gas Corporation successor to the Gas Council does a volume of nearly $25 billion a year and claims to be the largest gas utility in Europe It has always had dose links with TransCanada Pipelines in the technical ami marketing sense and since the energy crisis early this year it has been busily learning the basic lesson in the new energy ball-game: underprice your product Or increase demand into a vertical curve till have to invest billions to bring in new supplies In a word natural gas must be priced competitively with other fuels The higher prices of oil internationally must mean that gas prices rise to equivalent levels (foal will go the same way eventually British Gis has found that demand for gas has been growing in the UK by 10 to 13 per cent a year With the crisis last winter in other types of fuel it taxed its distribution system from Southern England up to Glasgow severely More supplies are com- Australia devalues Canberra The Australian government last night devalued the dollar by 12 per cent making it worth $13090 US New York Underwriters led by White Weld scheduled Montreal Island School $50 million of 20-year debentures for offering tomorrow subject to SEC clearance Ottawa Alastalr Gillespie minister of industry trade and commerce will head a 35-member trade mission to Brazil on Oct 18 to discuss manufacturing and technical opportunities in relation to Brazilian development Caracas Foreign companies operating in Venezuela face a tax bill of an additional $185 million this year according to government sources A rebate has been abolished Santiago Despite denials from officials in the US yesterday Chilean government spokesmen confirmed newspaper reports that a possible restriction on exports of copper was being considered to drive prices higher Detroit GM is postponing introduction of the Wankel rotary engine pending further development in emission control Washington NYSE chairman James Needham told the SEC yesterday that an increase in commission rales was vital if corporations were to get the capital they needed to stimulate the economy He said exchange members had been losing money steadily $75 million this year rates took a new turn today when the big New York bank Morgan Guaranty Trust Co disclosed it will cut its prime lending rate to top-drawer corporations to 11 per cent from the present 12 per cent effective tomorrow Hie bank comment on its move but the immediate reaction from the big First National Bank of Chicago was that "the market is agr preciative of the move but the cost of money though declining yet justify a Because of the huge amounts of hot money shifting from capital to capital according to moves in shortterm money rates the Morgan Guaranty action had an immediate effect in the European currency markets The dollar weakened slightly as rumors went around that some other big US money-centre banks would also cut their prime lending rate Hie stock market in New York scenting another sign of easier credit jumped nearly 15 points shortly after when other banks failed to fellow quickly the gain was pared to around 5 points shortly after midday -Later one small Los Angeles bank went down to an 11 per cent prime rate from 12 per cent Several other-smaller banks went to 11 per cent Washington announced that the US showed a trade deficit of $113 billion seasonally adjusted in August against a deficit of $728 million in July The larger gap was attributed to heavy oil up to $242 billion from $235 billion in July Federal Reserve chairman Arthur Burns said federal deficit spending has become a source of economic instability Fast deficits have enormously to aggregate demand for goods and' services but they added little to our capacity to Last deficit of $21 billion portrayed sorry record of fiscal policy of moderate monetary restraint remains and probably be required for a considerable Retailers! It pays to be undercover Why you join us? We are expanding and In doing so are transforming Ihe Domains Shopping Centre Into an Impressive enclosed mall Be a part ot an exciting 60 store shopping complex along with Horizon Zeller's Wootworth etc serving densely populated east end Montreal Official mall opening November 1974 some space available for immediate occupancy CaB or write to us for further information: The Cadillac Fairview Corporation Limited 550 Sherbrooke Street West 8th Floor Montreal Quebec H3A 1B9 Telephone: (514) 845-8274 DOMAINE gaom.