Petroleum minister Anura Yapa told reporters Saturday that feasibility and front-end-engineering-design (FEED) has already been completed for the project.
Sri Lanka's only refinery owned by state-run Ceylon Petroleum Corporation was built in the 1960s and yields a low proportion of light distillates and higher proportions of furnace oil compared to technology available today.
When crack margins (the gap between crude and refined products) narrow it is sometimes saves money for the country to shut the refinery and import refined products direct.
But a tax on refined products has created conditions for a seeming economic viability for the refinery.
Sri Lanka has been attempting upgrade the refinery by applying new technology such as hydro cracking, but the project is expensive.
Ceylon Petroleum Corporation chief executive Susantha Silva said Sri Lanka was now selling petrol and diesel with a lower level of sulfur than when the refinery started.
The refinery had been fine-tuned to handle Iranian light crude which Sri Lanka now finds it difficult to procure due to US sanctions.
Instead the country has been using an Oman light blend. Silva says the yield is less from the crude.
To recover the cost of the refinery however Sri Lanka has to sell petroleum at a cost plus, but some products including kerosene is still not sold at cost recovery prices.