Key facts
- Southeast Asian LNG demand is projected to increase significantly through 2035, driven by AI data centers.
- This growth contrasts with an expected 3-10% decline in overall Asian LNG demand for 2024 due to high prices.
- Data center power demand in Southeast Asia could jump from 17 TWh to 57 TWh by 2035.
- Singapore aims for 100% LNG reliance by 2035 as pipeline gas imports cease.
- India's data center expansion is unlikely to boost LNG demand due to higher costs compared to renewables.
- Grid infrastructure limitations pose a risk to accommodating the surge in power demand in Southeast Asia.
Southeast Asia's demand for liquefied natural gas (LNG) is poised for significant growth through 2035, primarily fueled by the expansion of AI data centers, according to analysts at Wood Mackenzie. This trend offers a substantial upside to the region's LNG demand outlook, as combined-cycle gas turbines are seen as the most reliable 24/7 power source for hyperscalers, especially given the relatively immature state of renewable energy infrastructure in the region.
The data center boom is expected to increase annual LNG demand growth in Southeast Asia by 16% by 2035. The region's data center project pipeline could more than triple to 9.4 gigawatts (GW) from the current 2.8 GW, leading to a jump in power demand from 17 terawatt-hours (TWh) to 57 TWh. Given the likely immaturity of grid-scale battery storage through the mid-2020s, gas turbines are considered the optimal choice for ensuring consistent power supply.
Singapore, already 95% reliant on natural gas for its grid, anticipates reaching 100% LNG dependence by 2035 as pipeline gas imports from Indonesia and Malaysia are expected to cease. Thailand also faces increased reliance on LNG as domestic production declines and pipeline imports from Myanmar diminish, with LNG potentially making up over 50% of its gas supply by 2035. Malaysia is actively developing new regasification terminals to support its growing data center capacity.
This surge in demand for LNG in Southeast Asia contrasts with a broader Asian trend, where demand is projected to fall for a second consecutive year in 2024 by 3-10% due to high prices. Shell, a major LNG trader, forecasts global LNG demand to rise to nearly 700 million tons annually by 2050, a 65% increase from 2025 levels.
However, the expansion of data centers in Southeast Asia faces challenges from lagging grid infrastructure development. Limited transmission capacity and connection delays could constrain further investment. In contrast, India's burgeoning data center sector is not expected to significantly boost LNG demand, as LNG-to-power generation is two to three times more expensive than renewables plus battery storage in the country. Consequently, gas is projected to remain under 2% of India's power generation mix through 2035.