Demand for liquefied natural gas (LNG) in Southeast Asia has found a new major driver apart from the years-long efforts to switch away from coal-fired power generation.
The AI boom and the data center construction in Asia are set to materially change Southeast Asia’s LNG demand outlook with a significant upside, as combined-cycle gas turbines (CCGT) remain the most reliable 24/7 power provider for hyperscalers amid relatively immature renewable energy-plus-batteries across the region, analysts at Wood Mackenzie say.
As a result of the higher gas demand growth, Southeast Asian nations where data centers are booming – including Singapore, Malaysia, Indonesia, and Thailand – will need additional LNG imports through 2035 as domestic natural gas output peaks, WoodMac reckons.
LNG’s Data Center Opportunity
This data center boom could raise annual LNG demand growth in Southeast Asia by 16% through 2035, the energy consultancy said in a new report this week.
By 2035, Southeast Asia’s data center project pipeline could more than triple to 9.4 gigawatts (GW), up from 2.8 GW at present. Thus, the power demand from hyperscalers will jump from 17 terawatt-hours (TWh) now to 57 TWh.
Considering that grid-scale battery storage would likely remain commercially immature across Southeast Asia through the middle of the next decade, gas turbines appear to be the best go-to option for data centers to ensure reliable 24/7 power supply, according to WoodMac’s analysts.
“What makes data centre demand interesting from an LNG perspective is the counterparty profile. These are large, creditworthy off-takers with power needs that remain stable regardless of economic cycles,” said Fadhlullah Omarali, principal analyst at Wood Mackenzie.
“That does change the risk of calculus for new supply into Southeast Asia.”
In Singapore, whose grid is 95% dependent on gas even today, LNG reliance could reach 100% by 2035 as pipeline gas imports from regional gas producers Indonesia and Malaysia are expected to cease in the early 2030s.
With declining gas production in the region and falling piped gas imports, Thailand will also depend more on LNG for its power mix, two-thirds of which is already gas-fired. As pipeline gas imports from Myanmar decline and Gulf of Thailand gas production drops, the LNG share of gas supply in Thailand could top 50% by 2035, WoodMac has estimated.
Malaysia, for its part, is currently developing 3.9 GW of data center capacity and is building new regasification terminals to import LNG to meet growing power demand.
However, in Malaysia and Thailand, data center investment “is growing quickly just as domestic gas output peaks and declines,” WodMac’s Omarali noted.
The rising power demand and falling domestic gas supply in all these Southeast Asian countries offer growth opportunities for LNG sellers and traders over the next decade.
Surging gas demand in South and Southeast Asia will push global LNG demand up by 65% by 2050 from 2025 levels, although growth this year has been stalled by the Strait of Hormuz crisis, Shell, the world’s biggest LNG trader, said in its annual LNG Outlook 2026 earlier this year.
Shell sees global LNG demand increasing to nearly 700 million tons annually by 2050, up by around 65% from the 2025 levels of 422 million tons.
Grid Constraints
Yet, grid infrastructure development lags the surge in power demand, and could delay Southeast Asia’s power boom, according to a report by Bain & Company and Standard Chartered.
Data centers, electric vehicles (EVs), and green industrial clusters are expected to lead to about 100 terawatt-hours (TWh) of incremental power demand in Southeast Asia by the end of the decade. But Southeast Asia could struggle to accommodate the surge in demand as the grid is built for yesterday’s demand patterns, the report found.
Limited transmission capacity and connection delays risk constraining further data center investment in the region, according to Bain’s Southeast Asia Data Center Operator and Hyperscaler survey in February 2026.
Of about $540 billion in green capital expenditure announced across Southeast Asia’s power and EV value chains between now and 2030, around $315 billion is on a credible path to deployment under current conditions, the report noted.
India’s Data Center Boom Won’t Unlock LNG Demand Surge
While Southeast Asia is set to see massive LNG demand growth due to the data center boom, South Asia, especially its biggest economy, India, is not expected to see material uptick in LNG due to the hyperscaler expansion, WoodMac says.
It’s not that India isn’t building data centers; on the contrary, the AI industry is booming there, but it would not be gas that would power the surge in electricity demand.
India’s data center capacity is set to jump fivefold to nearly 12 GW by 2035. However, LNG-to-power generation is two to three times more expensive than renewables plus battery storage in India, making gas economically unviable as a baseload fuel for data centers, according to Wood Mackenzie’s analysts.
None of India’s hyperscalers have announced gas-backed power supply agreements. On the other hand, the commercial and industrial renewable power purchase agreements (PPAs) have already exceeded 33 GW of contracted data center capacity.
Gas accounts for under 2% of India’s power generation mix and is expected to remain at that level through 2035, as coal and renewables continue to dominate, WoodMac says.
By Tsvetana Paraskova for Oilprice.com
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