The Indian government-controlled Oil and Natural Gas Corporation (ONGC) has agreed to acquire a 10% stake in an offshore gas field in Mozambique, as the emerging nation looks to tackle its rising energy needs with takeovers abroad.

India's biggest oil explorer said it will pay $2.6bn (£1.7bn, €1.9bn) for a 10% participating interest in the Rovuma Area 1 Offshore Block in Mozambique.

The definitive agreements for the deal were signed between the company's subsidiary for overseas projects, ONGC Videsh Limited (OVL), and Anadarko Moçambique Area 1 Limitada.

The acquisition is subject to approvals of the governments of Mozambique and India and other relevant regulatory clearances and pre-emption rights. The deal has a long-stop date of 28 February 2014.

Bank of America Merrill Lynch is the financial adviser of ONGC in the deal.

Strategic Acquisition

The Rovuma Area 1 covers about 2.6 million acres in the deep-water Rovuma Basin offshore Mozambique and represents the largest gas discovery in offshore East Africa. The offshore field has estimated recoverable gas resources of 35 to 65 trillion cubic feet.

"As a result of both transactions, OVL will own a significant interest in this strategic project in Mozambique. Area 1 has potential to become one of the world's largest LNG projects and today's acquisition marks a further significant step by OVL/ONGC group towards the energy security of our country," OVL chairman Sudhir Vasudeva said in a statement.

The subsidiary aims to increase its energy resources to 20 million tonnes of oil equivalent by fiscal year 2018 and 60 million tonnes by fiscal year 2030.

Other oil companies operating in the area include Anadarko, operator of the project, ENH, Mitsui, BPRL, Videocon and PTTEP.

India's Rising Energy Needs

Asia's third-largest economy has been importing more than half of its energy requirements. This has contributed significantly to the country's ever-increasing current account deficit.

The demand for energy is expected to increase further in the coming years as the economy expands further.

With a view to ensuring long-term supplies, oil companies in the country especially state-controlled firms are looking abroad for profitable acquisitions.

Earlier in June, ONGC along with its peer Oil India Limited, inked a deal to acquire a 10% indirect interest in the same Rovuma Area 1 Offshore Block from Videocon Mauritius Energy Limited.

BPRL Ventures Mozambique, another Indian government-owned firm, already holds a 10% interest in the offshore gas field.

In 2012, ONGC agreed to buy ConocoPhillips's 8.4% stake in Kazakhstan's Kashagan project for $5bn, the company's largest overseas acquisition.