Malaysia Turns to Domestic Gas as Power Demand Hits Record High Amid Heatwave, Data Centre Boom

KUALA LUMPUR: Malaysia is rapidly increasing the use of natural gas to generate electricity as the country faces record-breaking power demand driven by extreme heat and the fast-growing data centre industry.

According to data from the Grid System Operator (GSO), electricity demand in Peninsular Malaysia, which accounts for nearly 80 percent of the nation’s total consumption, jumped by 11.5 per cent in April compared to the same period last year.

To cope with the sharp rise, gas-fired power generation surged by 50.5 percent, reaching a record 5.54 terawatt-hours (TWh) in April, the highest increase since at least 2018. In contrast, coal-fired power generation dropped significantly to 6.67 TWh, marking its steepest decline in more than three years.

The shift continued through May, with gas-powered electricity generation climbing 28.3 percent between May 1 and 27, while coal use fell by 4.8 percent.

State energy giant Petronas said rising electricity consumption in Peninsular Malaysia has led to increased demand for natural gas, prompting the company to tap offshore gas reserves and expand LNG supply to the domestic market.

Data from Kpler showed that Malaysia shipped around 446,000 metric tons of liquefied natural gas (LNG) from offshore gas fields to Peninsular Malaysia this year  nearly three times higher than the 150,000 tons supplied during all of 2025.

Malaysia’s growing dependence on gas comes as several Asian countries, including Japan and South Korea, have increased coal consumption due to tighter LNG supplies linked to tensions in the Middle East and the ongoing U.S.-Israeli conflict involving Iran.

Analysts say Malaysia’s relatively low domestic gas prices have helped attract large-scale investments in data centres, especially as global technology firms expand operations across Southeast Asia.

Energy consultancy Energy Aspects estimated that Malaysia’s electricity demand could continue growing by around 4 percent annually in the coming years, mainly fueled by new data centres currently under construction.

In April, gas accounted for 42.6 per cent of Peninsular Malaysia’s power generation mix  the highest level since October 2019. while coal’s share dropped to 51.2 per cent from 62.2 per cent a year earlier.

Despite increasing domestic consumption, Malaysia also boosted LNG exports by 14.6 percent this year, reaching 12.81 million tons, according to Kpler data.

Industry analysts believe the global LNG market could enter an oversupply phase after 2028, potentially allowing Malaysia to continue exporting LNG under long-term contracts while purchasing cheaper spot LNG for domestic needs.

Malaysia’s Energy Commission expects warmer weather conditions and rapid digital infrastructure growth to keep electricity demand elevated throughout the year, while regional weather agencies forecast above-normal temperatures across Southeast Asia until at least July.