October 17, 2016 / 10:35 AM / 3 years ago

CORRECTED-UPDATE 1-Gas leak delays start-up of Qatar's Barzan gas project - sources

(Corrects third paragraph to read “...production capacity... instead of “...production...”)

By Tom Finn

DOHA, Oct 17 (Reuters) - Qatar has delayed the start-up of its Barzan Gas project because of a leak discovered in a gas pipeline, two sources with knowledge of the matter told Reuters.

The $10 billion project, a RasGas-operated joint venture between Qatar Petroleum and Exxon Mobil, is designed to meet rising domestic energy demand in the Gulf state as it prepares to host the soccer World Cup in 2022.

After repeated delays, the project’s first phase was due to start in November, boosting Qatari gas production capacity by up to 2 billion cubic feet per day when it reached capacity in the first half of 2017. But a leak was discovered in recent weeks, the sources said.

“There was a gas leakage in one of the project’s upstream pipelines, the impact of which is still being assessed,” said a Doha-based source familiar with the project who declined to be named as he was not authorised to speak publicly. “A start-up this year is unlikely.”

The source declined to comment on the size of the leak or whether it had been fixed.

RasGas declined to comment. An Exxon Mobil spokeswoman requested that enquiries be directed to RasGas.

Leaks in gas pipelines can cause damage to the environment and be challenging to fix, especially if the pipeline is under water and becomes flooded.

The delay to Barzan is a setback for Qatar, which has said the project will sustain economic growth at a time of weak state revenues due to low oil and gas prices.

Doha’s projections for an increase in gross domestic product in 2016 were partly based on output from the project starting by the end of the year, according to the Ministry of Development Planning and Statistics.

Gulf Arab countries which once saw natural gas largely as a byproduct of their oil production, and often sold it cheaply to local industries, are now eager consumers of gas in a region where population growth has driven up demand for electricity.

Qatar, the world’s leading liquefied natural gas exporter, faces growing domestic energy needs as it pursues a $200 billion infrastructure upgrade before the World Cup as well as expansion of its national airline, Qatar Airways.

Much of the production from Barzan, located in the North Field gas reservoir off the coast of Qatar, will be directed to the power and water sector, RasGas has said. (Editing by Andrew Torchia and Adrian Croft)

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