Russian government approves sale of Yamal stake to China fund

MOSCOW, Jan 22 (Reuters) - The Russian government has approved the sale of a stake in the Yamal LNG plant to China’s Silk Road Fund in a deal which should bring another $2 billion in investment for the project.

The $27 billion project which is due to start producing liquefied national gas (LNG) in 2017 has been struggling to raise funds due to international sanctions against Novatek , the main shareholder in Yamal LNG.

The government said the sale was approved on Thursday by the cabinet and will be sent to parliament for further ratification.

Novatek, Russia’s second biggest natural gas producer, agreed last year to reduce its stake in Yamal LNG to 50.1 percent by selling a 9.9 percent holding to the Chinese fund. France’s Total and China’s CNPC hold 20 percent each.

According to an addendum to the bill approved on Thursday, the Silk Road Fund will inject more than $2 billion.

Novatek, which is co-owned by Gennady Timchenko, an ally of President Vladimir Putin, was placed under U.S. sanctions in 2014 over Moscow’s role in the Ukraine crisis, limiting the company’s access to global financing.

Timchenko is also under the sanctions imposed by the United States on individuals.

Investment in Yamal LNG has reached $15 billion so far and the project has been trying to secure more funds from China and European export credit agencies.

The first production unit with an annual capacity of 5.5 million tonnes is due to be launched in 2017. Peak production of 16.5 million tonnes a year is expected to be reached in 2021.

Apart from bank financing, Novatek has also secured 150 billion roubles ($1.9 billion) from Russia’s rainy day National Wealth Fund for the project.

$1 = 80.1070 roubles Reporting by Vladimir Soldatkin; additional reporting by Katya Golubkova; editing by David Clarke