Surge in Southeast Asia's Energy Infrastructure Deals Driven by AI and Security Needs

The energy infrastructure landscape in Southeast Asia is witnessing a remarkable transformation, with deal values surging, marking a 2.5-fold increase compared to the previous year. This surge is attributed to a combination of rising energy security needs and the booming demand for artificial intelligence (AI) infrastructure, according to data from Chinese investment firm CGSI.

Singapore leads the region with energy infrastructure deals totaling $7 billion in 2025, while Malaysia recorded a significant year-on-year increase, reaching $5.3 billion. Analysts from CFGI Singapore noted that the urgency for these deals has been amplified by geopolitical tensions, particularly disruptions caused by ongoing conflicts in the Middle East, which have heightened concerns over energy supply security.

“What the conflict has added is urgency; once governments see the effect it has on domestic energy supply, energy security moves to the top of the agenda.”CFGI analysts

CFGI analysts noted that the conflict has added urgency to the situation; once governments see the effect it has on domestic energy supply, energy security moves to the top of the agenda. The region relies heavily on imports for its energy needs, with approximately 60% of crude oil and a third of natural gas sourced from the Middle East, making it vulnerable to supply shocks.

In addition to geopolitical factors, the growth in AI technology is driving demand for energy infrastructure. James Ong, group head of asset management at CGSI, emphasized that the energy requirements for AI are structural and will persist beyond short-term fluctuations in energy prices. Ong stated that the global buildout in artificial intelligence will have a load factor which is always increasing.

Investment activities are also being observed in cross-border energy projects. Indonesian companies are increasingly acquiring energy-related assets in Australia and Singapore, particularly in mining and recycling sectors. Joint ventures are common in Australia due to the sensitive nature of these industries. Furthermore, analysts have noted a reciprocal flow of investments between China and ASEAN, particularly in manufacturing sectors across Vietnam, Indonesia, and Thailand.

“The global buildout in artificial intelligence will have a load factor which is always increasing.”James Ong, group head of asset management at CGSI

The demand for power in the Asia-Pacific region is expected to rise due to the increasing need for data centers and electric vehicles. For instance, Malaysia is planning to add new gas-fired capacity by 2030, largely to meet compute-related demands. However, as the country faces declining gas supplies, it will require further investments in gas import infrastructure, including terminals and floating storage units, as approved by state-owned Petronas.

Renewable energy projects are also gaining traction, driven by their cost-effectiveness and the push for sustainability. Luv Parikh, head of Infrastructure Asia at Partners Group, noted that renewable energy is now at grid parity and is often easier to build compared to traditional coal or gas plants. However, investors are focusing on renewable projects that can deliver reliable power, such as solar paired with battery storage and geothermal energy, which is particularly valued for its ability to provide round-the-clock energy supply.

“The deals being done are not cheap, as contracted infrastructure in supply-constrained markets commands full prices; but they are investable.”CFGI analysts

Despite the promising growth in energy infrastructure, challenges remain, particularly in grid infrastructure investments. Analysts highlight that while the ASEAN Power Grid (APG) initiative aims to connect electricity networks across Southeast Asian nations, the high capital requirements and transmission outputs pose significant hurdles. The APG has set a target of achieving 17.6 GW of cross-border interconnections by 2040, with current projects contributing about 7.7 GW.

CFGI analysts pointed out that the cross-border nature of these grid infrastructure deals is attracting development funds, particularly through the APG, which connects Laos, Thailand, Malaysia, and Singapore. CFGI analysts emphasized that the deals being done are not cheap, as contracted infrastructure in supply-constrained markets commands full prices; but they are investable, and the right regulatory and financial frameworks are essential for attracting institutional capital.