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(Adds additional fuel import estimates, ethanol industry suggestions)
SAO PAULO, March 17 (Reuters) - Brazil's gasoline and diesel-fuel trade deficit will rise this year compared with 2013, the head of Brazil's petroleum regulator ANP said on Monday, as demand outstrips the capacity of the country's refiners.
Brazil's diesel deficit will likely rise to $9 billion and its gasoline deficit to $2.5 billion in 2014, Magda Chambriard, the ANP's director general, said at an event in Sao Paulo.
In the January-November period of 2013, the diesel deficit was $7 billion and the gasoline deficit nearly $2 billion, Chambriard said, noting she did not have full 2013 numbers.
The predicted rise in the deficit is based on an expected 4 percent increase in fuel demand in Brazil in 2014, Chambriard said. Brazilian fuel demand has been growing at a rate at least two percentage points above the expansion of gross domestic product for several years.
That expansion has outstripped the capacity of the 12 domestic refineries of Brazil's state-run oil company Petroleo Brasileiro SA to meet demand for gasoline and diesel.
Petrobras, as the company is known, has also seen efforts to build new refineries fall years behind schedule. The need to import more fuel, much of it from the United States and India, has saddled Petrobras, the country's dominant oil company and refiner, with growing refining losses.
Because of Brazilian government fuel-price controls, domestic fuel prices are below world prices, forcing Petrobras to take a loss on every barrel of gasoline and diesel it imports. The controls have also lowered economic returns from refining of domestic crude.
Draining cash for fuel subsidies even as it embarks on a $221 billion five-year expansion plan, the company's debt has soared. Fuel price controls have also discouraged competitors from entering Brazil's fuels market as rivals or partners.
Although Chambriard said she expected overall fuel imports to rise in dollar terms, others expect the volume of fuel imports to level off in 2014 with falling diesel imports counteracting more gasoline imports.
Petrobras is likely to import an average of 150,000 to 160,000 barrels per day (bpd) of diesel fuel in 2014, as much as 14 percent less than the 174,000 bpd average in 2013, an industry source with direct knowledge of the situation told Reuters.
At the same time, Petrobras gasoline imports are likely to nearly double to 60,000 bpd in 2014 from 32,000 bpd in 2013, said the source, who is not authorized to speak to the press.
But imports should eventually fall when the RNEST Refinery outside Recife in Brazil's northeast starts operating, likely in the fourth quarter of this year, the source said.
Among the factors that have boosted the demand for gasoline imports, Brazil's struggling ethanol and biodiesel industries have been hurt by the government fuel price controls that have made gasoline cheaper than ethanol in some states.
The resulting reduction in output and diversion of cane production to sugar rather than ethanol has caused ethanol prices to rise in recent years.
To ease their problems, the ethanol and biodiesel industries have asked the government to increase the required minimum amounts of ethanol and biodiesel in national fuel blends.
They have suggested raising the minimum amount of ethanol in gasoline to 27.5 percent from 25 percent. They have suggested raising the amount of biodiesel in diesel to 7 percent from 5 percent. Biodiesel is made from refined vegetable and animal oils.
But an increase is not likely in the near term, Ricardo Dornelles, director of biofuels for Brazil's Energy Ministry, said, speaking at the same event as Chambriard.
"The plan to raise the biodiesel blend is waiting on an impact study that should be completed in a year," Dornelles said, adding that automobile manufactures were opposed to raising the ethanol blend due to concerns over motor-peformance and durability questions.
Elizabeth Farina, president of Brazil's cane ethanol and sugar industry Unica, said raising the blend was the only immediate way to improve the sugarcane industry's outlook.
Since the start of 2014 six mills have filed for bankruptcy protection in the courts and attorneys for the industry say more will be forced to renegotiate their debts this year. (Reporting by Fabiola Gomes and Reese Ewing in Sao Paulo and Rodrigo Viga Gaier in Rio de Janeiro; Writing by Jeb Blount; Editing by Caroline Stauffer, Marguerita Choy and Lisa Shumaker)