India's MRPL sells first lower sulphur gasoil cargo in a year

* MRPL sells 0.25% sulphur gasoil 1st time since Oct 2011

* Expected to move away from high sulphur grade exports from 2013

* Secondary units to be fully commissioned by December

SINGAPORE, Oct 8 (Reuters) - India's Mangalore Refinery and Petrochemicals Ltd sold a lower sulphur gasoil cargo and offered another, its first such cargoes in more than a year, as it moves away from exporting the polluting high sulphur grade, traders said on Monday.

The state-run refiner sold a gasoil cargo with a low 2500 parts-per-million, or 0.25 percent, sulphur content for loading from New Mangalore over Nov. 1-3 to BP at premiums of about $2.75 a barrel above Middle East quotes.

This is $1.25 a barrel, or about 83 percent, higher than a similar cargo sold a year ago.

MRPL also offered a low sulphur gasoil cargo for Nov. 6-8 loading.

MRPL normally offers high sulphur gasoil every month and is one of most regular exporters of the grade, so any cutbacks will likely push up prices of the grade, the traders added.

Refineries around Asia have been upgrading facilities to produce cleaner-burning fuels, restricting the supply of the high sulphur gasoil which is still in demand from developing Asian nations like Indonesia, Vietnam, Pakistan and Bangladesh.

Demand for the fuel also remains robust from Middle Eastern and African countries like Egypt, Yemen, Jordan and Sudan.

Gasoil is often a heavily subsidised fuel in many countries, and so switching to cleaner gasoil could mean an increased strain on government budgets, especially when underlying crude oil prices remain high.

MRPL has largely been expected to move away from exporting the high sulphur gasoil grade from 2013 after the commissioning of secondary units including a diesel hydrotreater by December.

A diesel hydrotreater unit removes sulphur from diesel.

It has not been decided if the company plans to permanently offer gasoil with 0.25 percent sulphur or a lower sulphur content instead of its regular 0.5 percent sulphur, a source close to the matter said, adding that it will depend on economics for now.

MRPL's diesel output is expected to increase once its new secondary units are fully operational, but this may not mean more exports as domestic demand continues to grow steadily with sales of diesel-powered cars rising because of a widening gap between retail prices of gasoline and diesel.

MRPL is currently forced to export diesel with high sulphur content because India's emission standards cap the sulphur content at 350 ppm and 50 ppm.

But once it is able to produce more low sulphur diesel with the new hydrotreater unit, MRPL might be able to divert some of the cargoes to the domestic market, traders said.

"They will probably keep the option and export whichever grade gives them better economics," an India-based trader said.

(Reporting by Jessica Jaganathan; Editing by Himani Sarkar)

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