A computer-based system and method detects and specifies valve and ring leaks in reciprocating compressors of the type used in natural gas transmission networks. The system employs a method comprising the following steps. The cylinder pressure is measured as a function of cylinder volume to obtain a measured PV card. A predictive model then calculates a predicted PV card for the subject compressor cylinder without including effects of simulated leaks. The predicted PV card is them compared to the measured PV card. The nature and character of the differences between the measured and predicted PV cards indicates whether a leak in the subject compressor cylinder is a suction valve leak, a discharge valve leak, or a piston ring leak. The predictive model is then iterated with simulations of the indicated leak included until the resulting predicted PV card matches the actual measured PV card for the compressor cylinder. The final value of the leak parameters in the model required for the match indicate the nature and magnitude of a corresponding actual leak in the compressor cylinder. Other useful information such as the efficiency of the compressor system with and without the leak and the economic impact of the leak are also derived from the iterative match process.