NEW DELHI/SINGAPORE India's Reliance Industries, owner of the world's biggest refining complex, will halt heavy naphtha exports in 2017/18 after the full-scale start-up of its 2.2 million tonnes per year (tpy) paraxylene plant, four people with knowledge of the matter said.

The plant, located in western Gujarat state, is currently operating at about 800,000 tpy capacity, and the rest of the project's capacity is set to come on stream before the end of this financial year in March, one of the people said.

The petrochemical is primarily used in polyester and polyethylene terephthalate (PET).

The main feedstock for paraxylene is heavy naphtha, a crude-based product which can also be converted into reformates, a blending component for high-octane gasoline.

At full capacity, Reliance's paraxylene plant would require 2.7 million tonnes per year of heavy naphtha - reducing its ability to export the product and making it likely to resort to imports of heavy naphtha, the trade sources said.

The people declined to be identified because they were not authorised to discuss the matter publicly.

Reliance did not immediately respond to Reuters' requests for comments.

Traders said they expect Reliance to import about two medium-range vessel size a month of heavy naphtha if they do have to buy the product. It currently exports heavy naphtha on a sporadic basis, they said.

"Previously, Asia was not getting much heavy naphtha but these days, Russia is able to supply heavier grades of naphtha," said one Singapore-based trader.

Reliance will continue exporting paraffinic naphtha, which has a minimum 70 percent paraffin content and is used to make ethylene, a plastics feedstock.

Of India's total 730,000 tonnes of naphtha shipped out in January, over 220,000 tonnes were from Reliance and most of it in paraffinic form.

While the short-term supply outlook for naphtha in general is tight in Asia due to India cutting back exports, refinery maintenance, outages and a lack of alternative feedstock to replace naphtha, the longer-term outlook is for oversupply.

"The global market for naphtha will be over-supplied until at least 2020," IHS Markit said in a report, projecting global demand for naphtha (including natural gasoline) to be 1.18 billion tonnes in 2017.

But it said some markets could become short of naphtha after 2020, particularly heavy naphtha if investments were to fall off now.

(Reporting by Nidhi Verma in NEW DELHI and Seng Li Peng in SINGAPORE; Editing by Ruth Pitchford)