Sri Lanka Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in Sri Lanka, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals.
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Oil and Gas
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Overview

Oil Exploration:  Sri Lanka is renewing efforts to tap into oil and gas reserves estimated at approximately $250 billion across the Mannar, Cauvery, and Lanka Basins. The Petroleum Development Authority of Sri Lanka (PDASL) had initally expected to finalize the first set of exploration contracts by the end of 2022, but progress stalled amid economic and political instability. 
In mid-2025, the Cabinet approved the selection of a marketing consultant to promote a new licensing round for the Mannar Basin blocks. PDASL closed its RFP in September 2025. Once a consultant is officially selected, the government plans to launch a licensing round and call for Expressions of Interest (EOIs) for exploration investment. Given past setbacks, industry observers remain cautious about whether this effort will succeed.

Sri Lanka’s oil and gas exploration dates back to the 1960s. In 2008–2011, Cairn Lanka drilled exploratory wells in the Mannar Basin, confirming natural gas and condensate deposits, though the high cost of extraction stalled development. Recent geological studies suggest that three offshore sedimentary basins, the Mannar, Cauvery, and Lanka Basins, contain significant petroleum potential, with the Mannar Basin, located in the northwest, offering the richest prospects. 

Oil Refinery and Pipeline:  Sri Lanka’s only refinery, and its main 5.8 km port-to-refinery pipeline, require urgent modernization and expansion. Operated by the state-owned Ceylon Petroleum Corporation (CPC), Sapugaskanda was commissioned in 1969 (initially designed for 38,000 barrels per day) and now operates at approximately 50,000 barrels per day, meeting only 25–30% of the nation’s refined fuel demand. Although plans to modernize the refinery or build a new one have been discussed for many years, no project has been implemented. Several U.S. companies have submitted proposals, but none have materialized. In early 2025, Cabinet approval was granted for Sapugaskanda to undertake a Build-Operate-Transfer (BOT) expansion to about 100,000 barrels per day based on a 2022 feasibility study, and Expressions of Interest have now been invited. As of October 2025, 20 companies have been shortlisted for further evaluation. Meanwhile, CPC is evaluating bids to replace or upgrade the aging 5.8 km oil pipeline.”

Leading Sub-sectors

Refurbishment of oil refinery
Appraisal and development of natural gas discoveries  
Fuel supply

Opportunities

In August 2025, CPC called for EOIs for the development and expansion of the oil refinery. The project seeks to increase capacity to 100,000 barrels per day. There are also opportunities to supply equipment and services for oil and gas exploration projects. In June 2025, the government announced that it would include West Texas Intermediate (WTI) in its crude oil tenders.

Resources

  • Petroleum Development Authority (PDA)
  • Ceylon Petroleum Corporation (CPC)
  • Ministry of Energy (MoE)

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