Morgan Stanley Asia: Powering AI, Assessing LNG Risks
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Morgan Stanley asserts that power and natural gas form the backbone of the artificial intelligence supply chain. Asia accounts for half of global LNG consumption, with the power, industrial, and transportation sectors each consuming roughly one-third of imported natural gas. The report evaluates Middle East LNG exposure risks across Asian power and energy sectors.
Asian power depends on Middle East LNG for approximately 20% of its needs. A force majeure event at QatarEnergy would pose a critical risk to Asian data centers and power grids. India and Thailand have the highest exposure to spot LNG, whereas utilities in Malaysia and Indonesia face limited impact from fuel availability issues. Japan and South Korea import 11-20% of their LNG from the Middle East, primarily for power generation. Singapore has limited Middle East LNG exposure.
Rising LNG prices would enhance power spreads for efficient operators, particularly in liberalized markets like the Philippines and Singapore. Meanwhile, coal remains a critical substitute for LNG. Asia is a net producer of coal but a net consumer of natural gas. Coal currently trades at a significant discount to alternative fuels, which should drive faster gas-to-coal switching. South Asia possesses flexible coal-fired capacity that can readily absorb this switching demand.