Southeast Asia Picks Gas Over Green Hype as Power Demand Surges
By Irina Slav - May 07, 2025, 5:00 PM CDT
Natural gas is gradually going to overtake coal and crude oil as the biggest source of primary energy in Southeast Asia.
Demand for electricity has been on a strong rise in the region.
Wood Mackenzie: The region will be a net importer of liquefied natural gas by 2032.
Natural gas is gradually going to overtake coal and crude oil as the biggest source of primary energy in Southeast Asia, with a share of 30% by 2050. This is according to a new Wood Mackenzie report, which has become the latest to admit the inevitable: hydrocarbons will be around for much longer than transition advocates want.
Currently, Southeast Asia is partial to coal-powered generation thanks to abundant local resources and price considerations. Also, demand for electricity has been on a strong rise in the region, prompting more coal power plant construction alongside transition buildouts of wind and solar.
Vietnam is a case in point. In recent years, soaring industrial activity and economic growth well above the global average have made the country a power-hungry, predominantly manufacturing economy. Vietnam has become a solar power leader among the countries in Southeast Asia, but it continues to rely on thermal coal for industry and is one of the few countries worldwide building new coal-fired power capacity.
At the same time, Vietnam, like its neighbors, is building a lot of wind and solar. The problem with wind and solar, as recently so brilliantly illuminated by Spain and Portugal, is that they need baseload generation as backup and as a source of reliable electricity. According to Wood Mackenzie, this source is going to shift from coal to natural gas, demand for which the consultancy sees growing at a compound annual growth rate of 3.1% until 2035.
With demand, generation capacity will grow, too, substantially. Wood Mac sees this growth twofold over the next two decades and a half, while consumption expands by 89.5%. If anything, this is further proof that growing economies need reliable, dispatchable energy to keep remain on the growth path.
As the head of gas and LNG research at Wood Mac, Johnson Quadros, put it, "the surge in gas demand is driven by the region's rapidly growing economies, data centres expansion, the intermittent nature of renewable energy, and the ongoing transition from coal to gas power. However, the region faces challenges in meeting this demand through domestic production alone."
Indeed, the surge in gas demand that Wood Mac and others predict for Southeast Asia-and Asia as a whole-will cause a deeper dependence on imports because the region cannot cover its consumption locally. Indeed, transition outlet Global Energy Monitor has forecast the need for an 80% increase in LNG import capacity in Southeast Asia if natural gas demand continues to grow as strongly as it is growing currently.
Wood Mackenzie agrees, predicting the region will be a net importer of liquefied natural gas by 2032, with demand for the superchilled fuel rising by a whopping 182% over the next ten years, featuring some of the fastest national demand growth rates in the world. This will provide a massive boost for local production of natural gas.
"As domestic gas demand rises and energy security becomes an increasing concern, Southeast Asian countries-particularly Indonesia and Malaysia- shift their focus toward boosting domestic production," principal research analyst Raghav Mathur said. He added that new developments will sustain local gas production into the 2030s but by the end of that decade, demand growth will overwhelm domestic supply capabilities, prompting new frontier exploration to offset natural field decline.
The supply problem with gas, however, may turn out to be larger than just Southeast Asia. The International Gas Union last year warned that "Should gas demand continue to grow as in the last 4 years, without additional production development, a 22% global supply shortfall is expected by 2030."
Taken together with Wood Mac's new report, this means that expectations of a gas glut on a global scale are quite premature, and not only because building all that LNG capacity that is supposed to tip the world into an oversupply is taking longer than forecasters assumed it would. Morgan Stanley last year noted there was 150 million tons per year in new LNG capacity under construction, with its analysts saying "We expect gas market oversupply to reach multi-decade highs over the coming years." It seems they did not pay attention to Asian demand trends-and not just Asian, either.
Natural gas acquired a reputation for being a so-called bridge fuel between the oil age and the transition age. Then this reputation became the target of numerous attacks from pro-transition organizations on the grounds that although cleaner-burning than coal and oil, gas was still a hydrocarbon and, as such, evil. Indeed, some went as far as to produce research, claiming it was actually dirtier than coal. Now, gas is reasserting itself as a cleaner-burning alternative to coal-at a price. It is the price issue that could interfere with the bright prospects of gas demand and keep coal dominant for longer. A growing economy needs reliable energy if it wants to keep growing.
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