Malaysia Steps on Gas and Cuts Coal as Record Power Demand Meets the Global LNG Squeeze

Malaysia Steps on Gas and Cuts Coal as Record Power Demand Meets the Global LNG Squeeze Southeast Asia's fuel-switching pattern diverges from Japan and South Korea as Malaysia increases gas burn while its neighbours rush back to coal. Malaysia is stepping on gas and cutting coal use as power demand surges to record levels, a fuel-switching pattern that runs counter to the broader Asian trend of coal-fired generation surging in response to the LNG supply squeeze from the Hormuz closure.⁴ That matters because Malaysia's domestic gas production gives it an option that import-dependent neighbours do not have. Japan's coal-fired generation jumped 11.1 percent in April while gas output fell 12.9 percent. South Korea's coal surged 39.7 percent year-on-year to 10,733 GWh, the sharpest increase since August 2019. Both countries switched to coal because LNG became too expensive or too scarce. Malaysia can increase gas burn from domestic fields, avoiding the coal penalty that its neighbours are paying.² Asia is boosting coal use broadly as the Iran war squeezes global LNG supplies. The conflict has disrupted around 17 percent of Qatar's LNG export capacity, forcing Asian utilities to burn whatever fuel is available. Global coal demand has surged as the Middle East energy crisis deepens, with prices at Australia's Newcastle port rising 12 percent since the war began.³ The world is suddenly in the middle of a global energy crisis, with the Hormuz closure removing approximately 20 percent of global LNG supply from international trade. The disruption has pushed gas prices to their highest levels since the 2022-23 crisis and forced governments across Asia to scramble for alternative fuel sources.⁴ India is planning to shield businesses from power cuts this summer as the heatwave compounds energy stress. Indian power shortages in many states are nearing levels from 2014, when they were estimated to have shaved about 5 percent off GDP. The country's approach to managing the crisis through demand-side measures contrasts with Malaysia's supply-side response of increasing domestic gas production.¹ During May, coal-fired generation rose 18.3 percent in Japan and 14.7 percent in South Korea, while gas-fired output plunged 23.4 and 12.2 percent respectively. Nuclear power also declined, falling 2.7 percent in Japan and 14.6 percent in South Korea in April. The coal swing across the region is broad-based and accelerating.² Malaysia's ability to increase gas burn rather than coal gives it a potential emissions advantage over its neighbours during the crisis. But that advantage depends on whether domestic gas production can sustain the higher output levels that record power demand requires. If Malaysian fields cannot keep up, the country faces the same coal-or-blackout choice that Japan and South Korea have already made. What to watch is whether Malaysia's domestic gas production sustains the increased burn rate through the summer peak, and whether the country's coal reduction holds or reverses if LNG spot prices remain elevated and domestic gas fields face maintenance or depletion constraints.^4,2