Sri Lanka's Parliament on Wednesday approved the private sector participation in oil and gas exploration, paving way for the Indian companies to invest in the island nation.

The Parliament approved the Petroleum Resources Bill that will allow private investments in exploration and sharing of profits with the foreign and local companies.

Officials said India is likely to get at least two blocks for exploration on a profit sharing basis.

India already is successfully exploiting the oil reserves in the Cauvery basin between the north-western region of Sri Lanka and India's southern tip.

Indian Oil Corporation had entered the island nations' petroleum retail business with the inauguration of its first outlet in May.

In the early 1970s, Sri Lanka drilled seven wells in the north-western Mannar region but found no oil. The country continues to import all its petroleum needs.

The laws approved on Wednesday set the stage for a committee that will issue licences to the prospective investors for exploration of oil and gas. Earlier, the private sector was not allowed to get into oil exploration.

In May, Petroleum and Natural Gas Minister Ram Naik during a visit to Sri Lanka, said India was keen to enter into a joint venture with Sri Lanka for oil exploration along the island's north-western coast.

"We would like to have about two blocks...our Oil and Natural gas Corporation has the capability," Naik said while inaugurating the IOC retail outlet in Colombo.