China’s Silk Road Fund to invest in $27bn LNG facility

The $40bn vehicle will acquire a 9.9% stake in Russia’s Yamal LNG, the world’s largest natural gas development, liquefaction and transportation project.

The Beijing-based Silk Road Fund has agreed to buy a 9.9 percent equity stake in the Yamal liquefied national gas (LNG) project from Russia-based independent energy producer Novatek. 

The vehicle, which is set to join oil and gas majors such as Total and CNPC as shareholders, will also provide a 15-year loan of around €730 million (€665 million; $796 million) to finance the scheme. 

Located on the Yamal Peninsula in northwestern Siberia, the facility is designed to have an annual output of 28 billion cubic meters of natural gas. It is expected to produce 16.5 million tons per annum of LNG and up to 1.2 million tons per annum of gas condensate. 

The $27 billion project, which has already entered its construction phase, is billed as the world's largest in terms of exploration, development, liquefaction, transportation and sales of natural gas. 

“We are pleased to sign the definitive agreements to enter the Yamal LNG project, which is progressing on schedule and is widely viewed as sustainable due to its high-quality conventional reserve base and long-term contracts for almost 100 percent of its sales volumes,” said Wang Yanzhi, president of Silk Road Fund, in a statement.

The news comes amid reports stating that Yamal LNG project has been struggling to raise funds due to international sanctions against Russia over the Ukrainian crisis.

“With the closure of this transaction, we will achieve the appropriate target shareholder structure, which will contribute to the planned financing of the project and further facilitate its successful implementation,” said Leonid V. Mikhelson, Novatek's chairman. 

Chinese Premier Li Keqiang and Russian Prime Minister Dmitry Medvedev took part in the signing ceremony. 

Founded in December 2014, the Silk Road Fund targets medium- to long-term investment with a view to financing China's One-Belt-One-Road Initiative. Its investment spectrum covers infrastructure, resources and energy, industry and financial services.