Sri Lanka has asked the governments of India and China to place deposits of $100 million each for securing blocks to explore oil off the island's north-western shores.
"Out of the eight identified oil blocks we have given one each to India and China on a 'nomination basis' due to the close friendship between the nations," Petroleum Minister, AHM Fowzie said.
"We have also asked them to make a 10 million dollar payment as security for securing the oil blocks without a competitive bidding process," he said.
The deposit of 100 million dollars is in addition to the 10 million dollar security fee.
On behalf of India, state-run Oil and Natural Gas Corp (ONGC) has been awarded a block in the island's northwestern Mannar basin, he said.
Sri Lanka last year paid 10.5 million dollars and bought the seismic surveys conducted by Norway's TGS Nopec.
Sri Lanka might be able to produce oil within the next three years if exploration efforts are successful, Fowzie said.
The government has already advertised its exploration plans to foreign firms at various international forums and set up the petroleum resource development ministry in 2005 to facilitate exploration efforts.
Between the mid-1970s and mid-1980s, overseas companies had explored areas offshore Sri Lanka but failed to find any oil and gas reserves.