Key facts
- Southeast Asia's LNG demand is expected to see a significant upside due to the AI boom and data center construction.
- Combined-cycle gas turbines are the preferred 24/7 power source for hyperscalers in the region.
- Southeast Asian nations like Singapore, Malaysia, Indonesia, and Thailand will need additional LNG imports through 2035.
- Data center boom could raise annual LNG demand growth in Southeast Asia by 16% through 2035.
- Singapore's grid may reach 100% LNG reliance by 2035.
- India's data center expansion is unlikely to boost LNG demand due to higher costs compared to renewables.
The burgeoning artificial intelligence sector and the associated construction of data centers are poised to significantly increase liquefied natural gas (LNG) demand in Southeast Asia, according to analysts at Wood Mackenzie. This trend provides a new major driver for LNG consumption, complementing existing efforts to transition away from coal-fired power generation.
Analysts at Wood Mackenzie project that the data center boom could elevate annual LNG demand growth in Southeast Asia by 16% through 2035. The region's data center project pipeline is expected to more than triple from 2.8 gigawatts (GW) to 9.4 GW by 2035, leading to a substantial increase in power demand from hyperscalers, from 17 terawatt-hours (TWh) to 57 TWh.
Given that grid-scale battery storage is anticipated to remain commercially immature across Southeast Asia until the mid-2030s, gas turbines are seen as the most reliable option for ensuring the 24/7 power supply required by data centers. Fadhlullah Omarali, principal analyst at Wood Mackenzie, highlighted that the creditworthy nature of these large off-takers with stable power needs, irrespective of economic cycles, makes data center demand particularly attractive from an LNG perspective.
Singapore, which currently relies on gas for 95% of its power, may increase its LNG dependence to 100% by 2035 as pipeline gas imports from Indonesia and Malaysia are expected to cease in the early 2030s. Thailand also anticipates greater reliance on LNG as its domestic gas production and pipeline imports from Myanmar decline, potentially increasing LNG's share in its gas supply to over 50% by 2035. Malaysia is actively developing data center capacity and constructing new regasification terminals to meet rising power demands, even as its domestic gas output peaks.
Globally, Shell, the world's largest LNG trader, forecasts a 65% increase in global LNG demand by 2050 from 2025 levels, reaching nearly 700 million tons annually. However, a report by Bain & Company and Standard Chartered points out that grid infrastructure development is lagging behind the surge in power demand, potentially delaying the region's power boom. Limited transmission capacity and connection delays could constrain further data center investment.
In contrast, India's data center expansion is not expected to significantly boost LNG demand. Wood Mackenzie notes that LNG-to-power generation in India is two to three times more expensive than renewables coupled with battery storage, making gas economically unviable as a baseload fuel for data centers. Consequently, gas is projected to remain below 2% of India's power generation mix through 2035, with coal and renewables continuing to dominate.