Energy majors lock onto Southeast Asia in race for more gas for AI power demand

Key Points

• Research suggests energy companies are focusing on Southeast Asia for natural gas to meet AI-driven power demands.
• It seems likely that data center growth, especially for AI, is driving increased electricity needs in the region.
• The evidence leans toward natural gas being a key energy source due to its reliability and lower emissions compared to coal.

Growing Demand for AI Power

The rapid expansion of AI technologies is increasing electricity demand, with data centers projected to consume over 1,000 terawatt-hours globally by 2030

. Southeast Asia, with its booming data center market, is at the center of this trend, attracting significant investments.

Energy Majors’ Focus on Southeast Asia

Companies like Shell, TotalEnergies, and Eni are investing billions in gas exploration in Malaysia and Indonesia to secure natural gas, seen as essential for powering data centers reliably.

Role of Natural Gas

Natural gas is favored for its ability to provide stable power and reduce emissions compared to coal, which currently generates half of Southeast Asia’s electricity. This aligns with the region’s energy security needs.

Comprehensive Analysis of Energy Majors’ Focus on Southeast Asia for Natural Gas to Meet AI Power Demand

This detailed report examines why energy majors are increasingly targeting Southeast Asia for natural gas exploration and production to address the rising power demands driven by artificial intelligence (AI) technologies and data centers. The analysis is based on recent news and reports, reflecting the current landscape as of June 18, 2025, at 12:51 AM PDT.

Background and Context

The global energy sector is witnessing a significant shift due to the exponential growth of AI and its computational requirements. Data centers, which house the infrastructure for AI processing, are major consumers of electricity, with projections indicating a doubling of global electricity demand for data centers from 460 terawatt-hours in 2024 to over 1,000 TWh by 2030 . This surge is particularly pronounced in Southeast Asia, where digital transformation, cloud computing, and AI adoption are accelerating, driven by expanding digital economies and increased internet penetration.

Southeast Asia, comprising countries like Malaysia, Indonesia, Singapore, and others, is emerging as a critical hub for data center development. The region’s data center market attracted $10.23 billion in investments in 2023, projected to reach $17.73 billion by 2029, with a compound annual growth rate of 9.59% .

Energy Majors’ Strategic Investments

Energy majors, including Shell, TotalEnergies, Eni, Inpex, and ConocoPhillips, are pouring significant resources into gas exploration and production in Southeast Asia, particularly in Malaysia and Indonesia. Recent developments include:

• Shell: Increasing investments in Malaysia by 9 billion ringgit ($2.12 billion” target=”_blank” rel=”noopener noreferrer”> over the next 2-3 years, focusing on gas assets .
• TotalEnergies: Acquiring further stakes in gas assets in Malaysia, aligning with its strategy to expand integrated power business .
• Eni and Petronas: Pressing ahead with a joint venture to develop gas assets in Indonesia and Malaysia, with a deal expected by the end of 2024 .
• Inpex: Exploring resources and developing the Abadi LNG project, with operations in six blocks offshore Sarawak and Sabah, Malaysia .
• ConocoPhillips: Planning investments in Sabah, Malaysia, to tap into regional gas potential.

These investments are part of a broader race to secure natural gas, driven by the need to meet rising power demands from both population growth and the proliferation of data centers, which are critical for AI applications.

Reasons for Focusing on Southeast Asia

Several factors make Southeast Asia an attractive region for energy majors to invest in natural gas:

1. Growing Electricity Demand: The region’s electricity demand has risen by over 60% in the last decade, fueled by urbanization, rising incomes, and the need for cooling and appliances .
2. Natural Gas as a Transition Fuel: Currently, coal generates half of Southeast Asia’s electricity, accounting for 80% of power sector emissions . Natural gas is seen as a cleaner alternative, providing stable power for data centers while reducing emissions. Gas-fired power plants are particularly suited for the continuous, reliable electricity needed for AI computations.
3. Declining Local Gas Production and Import Needs: While gas production in Southeast Asia is expected to drop by 20% between now and 2035, LNG is seen as a viable backfill due to existing gas-based infrastructure , making local production investments crucial for energy security.
4. Strategic Location and Infrastructure: Southeast Asia’s strategic location, with countries like Malaysia and Indonesia having established gas infrastructure, facilitates both local consumption and potential exports. The focus on local production for local consumption is driven by geopolitical uncertainties, ensuring a stable energy supply for data centers .
5. Policy and Economic Drivers: Competitive power prices, rapid infrastructure development, and accommodative policy landscapes in countries like Malaysia and Indonesia support gas investments Additionally, data localization laws in Thailand, Singapore, and Indonesia mandate local data storage, further boosting data center growth and energy needs.

Detailed Investments and Actions

To organize the specific investments, the following table summarizes the actions of energy majors in Southeast Asia:

This table highlights the scale and focus of investments, emphasizing Malaysia and Indonesia as key targets.

Challenges and Considerations

While the focus on natural gas aligns with current energy needs, there are challenges. The region’s heavy reliance on fossil fuels, with coal still dominant, faces environmental scrutiny, and there is a push towards clean energy, with renewables expected to meet over 35% of energy demand growth by 2035.

However, the immediate need for reliable power for data centers makes natural gas a practical choice, balancing energy security with emission reduction goals.

Conclusion and Future Outlook

The race for natural gas in Southeast Asia by energy majors is a strategic response to the growing power demands of AI and data centers, driven by the region’s digital transformation and energy security needs. Investments in gas exploration and production aim to meet local consumption, reduce import dependence, and leverage existing infrastructure. As Southeast Asia continues to grow as a data center hub, the role of natural gas as a transition fuel will be crucial, though long-term shifts towards renewables will shape future energy strategies.