If confirmed, the investment would become the latest in a series by South Korean firms, including Hyundai Motor Co , which plans to set up an electric car factory.
In a statement, Industry Minister Agus Gumiwang Kartasasmita said he had met LG Chem officials this week over a plant planned to turn out cell batteries and battery modules, as well as help to recycle batteries.
LG Chem could also do research in Indonesia on electric vehicles, particularly motorcycles, using the batteries, said Kartasasmita, who was appointed last month to President Joko Widodo's second-term cabinet.
Kartasasmita said he had suggested the second largest city of Surabaya as a possible site for research trials.
Widodo has promised more investment opportunities to create jobs in Southeast Asia's largest economy in his second five-year term that began on Oct. 20.
He will travel to the city of Busan next week when South Korea hosts a summit of the Association of South East Asian Nations (ASEAN).
Indonesia and South Korea wrapped up talks on a trade and investment pact last month and officials had said they were eyeing an official signing during Widodo's trip.