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Gather the ingredients.
Rub the oil over the bottom of a regular-sized pot with a tight-fitting lid.
Add the rice, coconut milk, water, salt, and shredded coconut. Stir and set over high heat. Bring to a bubbling, but not rolling, boil.
Immediately reduce heat to low (right above the lowest setting) and cover tightly with a lid.
Allow to cook for 1 hour, or until the coconut-water has been absorbed by the rice.
When all (or nearly all) of the liquid is gone, turn off the heat, but leave the pot on the burner, covered. Allow the rice to sit for another 5 to 10 minutes, or until you're ready to eat. Your coconut rice will stay warm this way for 1 hour or more (a great make-ahead tip if you're expecting company.).
Fluff the rice with chopsticks or a fork, and serve with your choice of entree.
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