The petroleum resource-bearing Cauvery Basin straddle parts of southern India and northern Sri Lanka.
The government has already called for bids to hunt oil in demarcated blocks in the Mannar basin, which is south of the new area but is also to the northern side of the island's western coast.
But a document submitted to the cabinet of ministers by the petroleum ministry said oil firms had expressed interest in exploring in the Cauvery basin area where India has already discovered oil and gas.
Oil companies will be invited to explore both on land in the northern part of Sri Lanka and in offshore waters off the island's northwestern, northern and north-eastern offshore areas.
The government statement said the issue of foreign interest