A statement issued by the Petroleum Industries Ministry said that no negotiations or talks with the IOC or any other foreign party had taken place with regard to constructing a second refinery.
The ministry was responding to Indian media reports that IOC's Lanka entity LIOC was to build a new refinery adjacent to the island's only refinery at Sapugaskanda, a north Colombo suburb.
According to reports, IOC was to invest Rs 20,000 crore in a joint venture with Sri Lanka's state fuel entity Ceylon Petroleum Corporation.
The second refinery was to raise the island's current refining capacity from 2 mtpa to 6.5 mtpa by 2020.
The IOC which set up its Sri Lanka operations in 2003 operates some 150 retail fuel stations enjoying over 43 per cent of the market share.