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UPDATE 2-India's Reliance to boost profit, naphtha exports by using ethane

* To export additional 500,000 T naphtha from this fiscal yr

* To import 1.4 mln T ethane in 2017/18; 1.6 mln T in 2018/19

* Sees operating profit up by $300 mln in 2017/18

* Traders see minor impact of extra supplies on naphtha prices (Adds market reactions)

MUMBAI/SINGAPORE, Aug 23 (Reuters) - India's Reliance Industries Ltd expects to increase operating profit and naphtha exports as it switches to cheaper ethane at its petrochemical projects, a company executive said on Wednesday.

Reliance's annual naphtha exports will rise by 500,000 tonnes this fiscal year, said Vipul Shah, chief operating officer for petrochemicals at Reliance.

Asia is structurally short of naphtha and relies on the West and Middle East to fill most of the gaps.

Reliance, owner of the world's biggest refining complex and also a leading petrochemicals player, on average exports more than 200,000 tonnes of naphtha in a month.

Reliance aims to import 1.4 million tonnes of ethane from North America in 2017/18, rising to 1.6 million tonnes from the next fiscal year, said Shah at a conference.

The conglomerate will use ethane at its crackers at Dahej, Hazira and Nagothane in western India. Previously, the Dahej and Nagothane plants were running on gas, while Hazira was using naphtha as feedstock.

"Since we will be able to bring in 1.4 million tonnes of ethane our operating profit can go up by $300 million this fiscal year," Shah said.

Billionaire Mukesh Ambani-backed Reliance has been posting robust petchem operating profit margins. They hit at an all-time high of 15.8 percent in the June quarter, it said last month.

Shah expects the company's operating profit to rise by up to $400 million in the 2018-19 fiscal year if market dynamics do not change significantly.

To cut its operating costs, Reliance has bought six very large ethane carriers.

Reliance has no plans to convert its naphtha-based cracker at Vadodra in western Gujarat state to ethane, Shah added.

Additional naphtha exports from Reliance are expected to have little impact on the market, trade sources said, although it depends on cargoes arriving in Asia from the Middle East and the West, including Europe.

"The impact should not be that bad. It works out to an addition of one to two medium range (MR) size tankers of naphtha more (in a month)," said a Singapore-based trader.

One MR cargo is about 30,000 tonnes. South Korea alone, which is Asia's top naphtha importer by country, imports more than 1.2 million tonnes of naphtha a month.

Naphtha prices have been recovering due to strong demand, as the high cost of liquefied petroleum gas (LPG) prices prompted buyers to use more naphtha. LPG can replace at least 5 percent of naphtha in some Asian crackers. (Writing by Nidhi Verma; Editing by Mark Potter)