Southeast Asia LNG Demand Climbs as Data Centers Lock In Gas

Data centers become a new LNG customer in Southeast Asia

For years, the case for liquefied natural gas in Southeast Asia rested on replacing coal. That has now changed. Hyperscale data centers have become a separate source of demand, and they are tying the region's power systems more tightly to imported gas just as Asian spot prices sit far above where they were a year ago.

Wood Mackenzie set the terms of the discussion with research released in early September and debated at Gastech 2026 in Bangkok. It projects that Southeast Asia's data center pipeline will grow from 2.8 gigawatts today to 9.4 GW by 2035, and that the sector's electricity use will rise from 17 terawatt-hours to 57 TWh over the same period.23 The consultancy estimates that this buildout could raise the region's annual LNG demand growth by 16% through 2035.23 Its reasoning is that combined-cycle gas turbines are currently the most practical way to give data centers round-the-clock power at scale, and that grid-scale batteries are expected to stay commercially immature in the region until the mid-2030s.3

The trade press, consultancies and regional outlets broadly agree on the demand forecast. They disagree on whether the region should welcome it. The likely result is that gas wins the next decade, though at a higher price and with more risk than most of the forecasts assume.

Why it matters country by country

The effect is uneven across the region. In Singapore, roughly 95% of the grid runs on gas, so almost every new megawatt of data center load turns directly into extra LNG purchases.3 Piped supplies from Malaysia and Indonesia are expected to end by the early 2030s, which would leave the city-state relying on LNG for close to all of its gas.2

Wood Mackenzie sees Malaysia and Thailand as the larger growth markets, because domestic and piped gas supply is falling in both, leaving LNG as the only fuel for new gas-fired plants.3 Malaysia has 3.9 GW of data center capacity under development and is building regasification terminals to keep up.2 Thailand already generates about two-thirds of its power from gas. Wood Mackenzie expects LNG to supply more than half of Thailand's gas by 2035 as output from the Gulf of Thailand and pipeline imports from Myanmar decline.2 Further south, Indonesia's Batam is developing into the third part of the Singapore-Johor-Riau data center corridor, with more than 450 MW planned. Grid reliability is already a concern there.3

Malaysia shows most clearly how the shift plays out. Gas-fired generation in peninsular Malaysia jumped 50.5% year on year in April to a record 5.54 TWh, while electricity demand rose 11.5%, driven by a heatwave and data center load.21 Petronas shipped 446,000 tonnes of LNG from its offshore fields to the peninsula in the first part of the year, close to three times the volume for all of 2025.21 In September, the Energy Commission said data centers reached a record 9.3% of power consumption in the second week of August, against an average of about 7% this year. Officials said that share could climb as high as 31% of peninsular demand by 2035.24 Economy minister Akmal Nasir said the country needs about 9 GW of additional gas-fired capacity by 2032 as it phases out coal by 2044.24

The private sector is moving even faster. YTL Power and partner Ganda Power reserved four more Siemens Energy heavy-duty turbines in September, bringing their total to seven units and more than 5,250 MW. That is part of a gas buildout of over 5.2 GW across Malaysia, Indonesia, Thailand and Vietnam that analysts put at more than $10.5 billion. Vietnam is heading the same way: nearly 4,000 MW of LNG-fired capacity came online in its Southeast region this year while the country tries to supply new hyperscale campuses.10

The price problem

The demand story would be simpler if gas were cheap, and it is not. The Iran war, which began with U.S. and Israeli strikes in February, disrupted shipping through the Strait of Hormuz. Before the conflict, about 90% of the natural gas passing through the strait went to Asian buyers.8 In March, Qatar halted LNG production and the UAE stopped loading cargoes, removing roughly a fifth of global LNG supply. Thailand was among the buyers rushing to tender for prompt spot cargoes.20

Prices remain high. The front-month Japan-Korea Marker futures contract settled near $26.39 per million British thermal units on October 14, about 139.5% higher than a year earlier.1117 Over the past month, the contract traded between roughly $25.21 and $27.51.16 Price trackers report slightly different figures, which is common in a volatile spot market. One independent estimate put the Asian spot reference at about $30 on October 15, while another placed the JKM-linked figure at $25.74 at the end of September.1214 Whichever number is used, delivered LNG in Asia costs several times more than U.S. Henry Hub gas, which trades around $3.07 to $3.26.1315

That spread largely explains why the United States has become the region's supplier of choice. Forbes reports that U.S. exporters, citing Reuters data, shipped just over 73 million tonnes from January through July, up 23% on an annualized basis. The International Energy Agency expects U.S. LNG to make up a third of the global market by the end of the decade.2 U.S. industry representatives at Gastech presented contract flexibility and freedom to choose destinations as their selling points. They named permitting speed, not gas resources, as the main constraint.2

Malaysia offers some protection from these prices for now. The government prices gas for the power sector below international LNG benchmarks, which, according to Energy Aspects, has helped attract data center investment.21 That policy also means part of the cost of the AI buildout is being absorbed by the state rather than charged to the companies consuming the power.

Where the coverage diverges

The industry and the energy-transition analysts agree that data centers are driving up gas demand. They disagree sharply about whether that is a good outcome.

The industry view is that data centers are excellent customers. Wood Mackenzie's Md Fadhlullah Omarali argues that their large balance sheets and steady loads, which hold up across economic cycles, lower the risk for new LNG supply heading to the region.26 Gastech organizers estimated that agreements and investment commitments announced at the conference were worth about $40 billion. They included a GE Vernova turbine deal with B.Grimm Power and a 35-year production-sharing contract in the Malaysia-Thailand Joint Development Area.2 Global Energy Monitor counts more than 100 GW of gas power and 70 million tonnes a year of LNG import capacity still planned across the region, a buildout worth about $160 billion.9

The other side argues that the region is taking on a dependency it will regret. Christina Ng of the Energy Shift Institute questions whether importing more LNG improves energy security at all. She points out that long-term contracts do not remove exposure to price swings or geopolitical shocks.67 Zero Carbon Analytics reports signs that high costs and volatility since the Iran conflict are already weakening Asian LNG demand, and that some companies have signed clean-power purchase agreements for data centers.7 Even Wood Mackenzie's own research finds that LNG-to-power costs two to three times as much as renewables paired with batteries in India, which is why it expects gas to play little role in powering South Asia's data centers.3

Thailand's signals are mixed. At Gastech, energy minister Akanat Promphan described plans to expand LNG capacity from 9 million to 27 million tonnes.2 Global Energy Monitor, however, points to Thai plans to reduce reliance on imported LNG in favor of renewables and nuclear. In Vietnam, Vingroup has proposed replacing a planned 4.8 GW LNG plant with renewable generation because of price risk.9 Both things can hold at once: governments are building import capacity as insurance while saying they want to rely on it less.

The likely outcome

The evidence points to gas staying central for at least the next decade. The region lacks the transmission infrastructure needed for large-scale electrification, and the approach taking shape is to expand gas and solar together rather than choose between them.1 Data center developers have tight deadlines, and gas turbines and floating regasification units can be delivered faster than transmission networks can be rebuilt.2

Market conditions could ease the cost. ICIS analyst Alex Siow expects the global LNG market to be clearly oversupplied after 2028. He suggests Petronas could then keep exporting under long-term contracts and buy cheaper spot cargoes for domestic use.21 If that happens, the region's gas commitment will look sensible in hindsight. If supply disruptions like this year's recur, governments that tied their digital economies to imported fuel will face higher electricity tariffs or larger subsidies.

The most useful recent signal comes from Malaysia. Its prime minister told Parliament in February that data center proposals with no AI connection, built mainly to use cheap land, power and water, had not been approved for nearly two years. That suggests Southeast Asian governments now treat electricity, not land or tax incentives, as the main limit on data center growth. For now, gas is what fills that gap, and the region will be exposed to LNG prices for as long as it does.