Originally unveiled in March 2013, the DKr 28.5bn ($US 4.3bn) Togfonden DK programme sought to harness North Sea oil revenues to accelerate services and increase capacity across the Danish network through investment in new and enhanced infrastructure. The government forecast that the programme would offer a 5.4% internal rate of return and reduce travel time by 9 million hours a year while generating around 20,000 new jobs.
However, with the price of a barrel of Brent crude, the benchmark for North Sea oil, falling from $US 110 in early 2014 to less than $US 40 at the start of this year, doubts have begun to emerge over the viability of the Togfonden funding mechanism.
On May 18 Danish national broadcaster DR published details of a briefing note it had obtained from the Ministry of Finance which suggests projects accounting for three quarters of the total value of the programme are now likely to be scrapped.
According to DR, the briefing note proposes that 10 projects should be dropped from Togfonden. These include:
- Velje bypass (new line)
- Hovegård - Aarhus (new line)
- Odense - Middlefart (new line)
- Fredericia - Hobro (upgrade)
- Hobro - Aalborg (upgrade)
- Velje - Struer (electrification)
- Aalborg - Frederikshavn (electrification)
- Østerport - Helsingør (upgrade), and
- Billund airport rail link (new line).
The total value of the projects is DKr 21.1bn and their abandonment would slash the total value to just DKr 7.4bn, with only a handful of schemes remaining, including electrification of the Fredericia - Aalborg and Roskilde - Kalundborg lines, the rollout of Wi-Fi on trains, and capacity enhancements for freight traffic in northern Jutland.
In 2013 Togfonden was criticised in the Danish press by several oil industry experts because funding for the programme is based on oil prices rising at a consistent rate to reach $US 218 a barrel by 2035. Indeed, by the time the government reached an agreement on the programme in early 2014 confidence in the prospects for North Sea oil was already beginning to cool and oil companies including Norway's Statoil and Denmark's Maersk Oil were scaling back their plans for investment in the North Sea oilfield.
With analysts forecasting little improvement in the price of Brent crude over the remainder of the decade, those weaknesses highlighted in the foundations of Togfunden could now fatally undermine the prospects of the one hour plan.