Colombo - Iranian President Mahmoud Ahmadinejad Tuesday inaugurated the construction of an oil refinery expansion project in the outskirts of Sri Lanka's capital.

The inauguration of the project by the visiting Iranian leader followed the signing of agreements on Monday night for Teheran to provide assistance to the tune of 1.5 billion US dollars for infrastructure development projects, officials said.

Ahmadinejad, who arrived in Colombo on Monday evening, was scheduled to travel to the south-eastern part of Sri Lanka later Tuesday to lay the foundation for the construction of a multi-purpose hydro-power project which could generate 100 megawatts of electricity, but the project was later inaugurated by ministers representing the two countries.

The visit was cancelled due to bad weather conditions which prevented helicopter transportation, officials said.

The expansion of the oil refinery project will help the Sri Lankan government to increase the refinery capacity to 100,000 barrels per day from 50,000 barrels and reduce imports of refined fuel.

"We see many opportunities for development between the two countries," the Iranian president said after the signing of six agreements between Sri Lanka and Iran on Monday night.

He said co-operation between the countries would not only help the two nations, but also help to establish peace in the region.

The visit came after Sri Lankan President Mahinda Rajapaksa visited Teheran late last year.

Ahmadinejad's next stop on his regional tour is India. (dpa)