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ndonesia has opened the possibility for Netherlands-based Royal Dutch Shell Plc., Europe's second largest oil company, to build a refinery in Batam, while shortlisting the company to the explore Natuna block with state oil and gas firm PT Pertamina.

Pertamina has been handed the lead in the massive Natuna project and is now seeking partners.

On Saturday, Investment Coordinating Board (BKPM) chairman M. Lutfi said that while putting Shell on the government's shortlist to explore Natuna, Indonesia had also offered the company to build a plant in Batam for refining and cracking. Lutfi was speaking to reporters after accompanying Vice President Jusuf Kalla in a meeting with Netherlands Prime Minister Jan Peter Balkenende in The Hague.

"We offered the prime minister the possibility to move Shell's facilities from Singapore to Batam. It can do refining and cracking in Batam due to the large amounts of gas there *in the Natuna block*," he said.

He added that if Shell refined 320,000 barrel of oil equivalent per day, it would create 42 new sectors and absorb 192,000 new workers.

"It turns raw materials into half-processed goods," he said.

Total investment for the Natuna block is estimated at US$39 billion, according to the BKPM. Lutfi said that besides Shell, US-based ExxonMobil, Norway's StatOil and China's CNOOC had expressed interest in exploring the site.

The government has ended its contract with ExxonMobil - the previous operator - to explore the block, giving Pertamina the lead in the project. Kalla said the government wanted its natural resource to be explored by several parties "to be more competitive".

"We don't want our all natural resources in one basket. It should be a combination, not only American, but also European, so there will be a comparison to be more competitive," he said.

"Shell has technical experience. I said *to the prime minister* that as long as it complies with the requirements, we're very welcoming."

He added that Pertamina, not foreign companies, should play the biggest role in exploring oil and gas in Indonesia, unlike in previous deals.