Subodh Dakwale, Managing Director of the Lanka IOC, a unit of Indian Oil Corporation said if the project goes ahead it would be a joint venture initiative with the Ceylon Petroleum Corporation.
However he said no final decision has been made in this regard.
According to him, a group of experts who arrived from India in April has done preliminary studies on the possibility of setting up a new green field oil refinery.
The refinery, if goes through will be located in Colombo and will refine 100,000 barrels per day.
IOC has also shown an interest in upgrading the Sapugaskanda Refinery which has been built in 1969 and is in need of up-gradation.
However the government of Sri Lanka has not give the green light for the proposal.
Sri Lanka imports a major portion of its oil requirement in finished form thus draining out considerable sums of its forex reserves.