At present Sri Lanka imports crude oil and the state-owned Ceylon Petroleum Corporation (CPC) is engaged only in downstream activities like refining and distribution, though it has an exploration division.
Minister Fowzie said the cabinet has already approved the proposal to set up an upstream firm and that the legal draftsman is now preparing the documentation to incorporate the company.
The upstream company is expected to engage in oil exploration and production activities, though it is not yet known whether it will become a joint venture partner in any foreign companies that buy exploration blocks and discover oil in Sri Lanka.
The government has said that it may go on a roadshow to auction several offshore exploration blocks later this year.
Meanwhile, the government is also trying to boost refinery capacity by expanding CPCs plant in Sapugaskande.
The government has sought a 500 million dollar