DOHA - Major gas producer Qatar has launched a $2.5 billion two-part green bond, fixed income news service IFR said on Tuesday.

The Gulf Arab state has sold $1.0 billion in a five-year tranche at 30 basis points (bps) over U.S. Treasuries (UST) and $1.5 billion in 10-year bonds at 40 bps over the same benchmark, the IFR report said.

The price was tightened from initial guidance of 70 basis points over UST for five-year bonds and from 80 bps for the 10-year note after combined orders topped $10.9 billion.

It is the Gulf Arab state's first external debt issuance in four years.

The auction, which is being led by Qatar's ministry of finance, will provide funds to help finance eligible green projects.

"We're not hungry for the money. It's purely to make a statement," Qatari Finance Minister Ali Al Kuwari said in January, referring to the planned sale.

"The market is hungry for issuance. We've been approached by many investors."

Qatar, one of the world's largest exporters of liquefied natural gas (LNG), is massively expanding gas production and expects to increase output by 85% by the end of the decade.

Global accountancy firm KPMG, in a December report, encouraged Qatar to issue green bonds and embrace sustainable financing mechanisms to meet its sustainability goals.

Credit Agricole and HSBC were selected as green structuring coordinators. Both also acted as global coordinators with JPMorgan and QNB Capital while Barclays, Citigroup, Deutsche Bank, Goldman Sachs International, SMBC Nikko Capital Markets and Standard Chartered were lead managers.

(Reporting by Md Manzer Hussain, Andrew Mills, Mohammad Edrees and Federico Maccioni; Writing by Andrew Mills; Editing by Kevin Liffey Editing by Sonali Paul, David Goodman and David Gregorio)